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2023 ReportM O U N T V I E W E S T A T E S P. L . C . A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 0 Mountview Estates P.L.C. Mountview House, 151 High Street, Southgate, London N14 6EW Tel:+44 (0) 20 8920 5777 Fax:+44 (0) 20 8882 9981 www.mountviewplc.co.uk Mountview Estates P.L.C. Annual Report and Accounts 2020 Mountview AR2020.indd 3 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:10 Mountview Estates P.L.C. Annual Report and Accounts 2020 About Us Mountview Estates was established in 1937 as a small family business based in North London by two brothers, Frank and Irving Sinclair. Mountview Estates P.L.C. is a Property Trading Company. The Company owns and acquires tenanted residential property in England and Wales and sells such property when it becomes vacant. Mountview AR2020.indd 4 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 Our Performance Revenue Gross Profit Profit before Tax 0.8% £64.9m (2019: £65.4m) 1.5% 0.9% £41.4m (2019: £40.8m) £34.9m (2019: £34.6m) Profit before Tax *excluding Investment Properties Revaluation 4.7% £35.9m (2019: £34.3m) T R O P E R C G E T A R T S I Shareholders’ Equity Earnings per Share Net Assets per Share Dividend per Share 3.5% £379.6m (2019: £366.9m) 1.0% 725.7p (2019: 718.3p) 3.5% £97.4 (2019: £94.1) 400p (2019: 400p) Mountview Estates P.L.C. advises its shareholders that, following the issue of the final results, the relevant dates in respect of the proposed final dividend payment of 200 pence per share are as follows: Ex dividend date 9 July 2020 Record date Payment date 10 July 2020 17 August 2020 Contents STRATEGIC REPORT FINANCIAL STATEMENTS OTHER INFORMATION 89 Notice of Meeting 95 Shareholders’ Information 01 Our Performance 02 Chairman’s Statement 03 Chief Executive’s Statement 04 Where we Operate 04 Review of Operations 09 Principal Risks and Uncertainties 12 Section 172 Statement 49 Consolidated Statement of Comprehensive Income 50 Consolidated Statement of Financial Position 51 Consolidated Statement of Changes in Equity 52 Consolidated Cash Flow Statement 53 Notes to the Consolidated Financial 14 Operational response to Covid-19 Statements GOVERNANCE 15 Directors and Advisers 16 Directors’ Report 70 Independent Auditors’ Report to the Members of Mountview Estates P.L.C. 75 Company Balance Sheet under UK GAAP 76 Company Cash Flow under UK GAAP 77 Notes to the Financial Statements 25 Statement of Directors’ Responsibilities under UK GAAP 26 Corporate Governance 84 Independent Auditors’ Report to 31 Report of the Audit and Risk Committee 35 Remuneration Report 47 Report of the Nomination Committee the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements 88 Table of Comparative Figures Mountview AR2020.indd 1 27569 7 July 2020 9:52 am Proof 22 01 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 Chairman’s Statement Dear Shareholder, INTRODUCTION In my statement this year I would first like to refer to the Covid-19 pandemic where the UK restrictions were introduced shortly before our year end. As such this did not affect the 2019-20 financial year, but it has meant that we have had to adapt in the new year to accommodate working within the Government restrictions. Inevitably these restrictions have had an immediate effect on our operations and it is a huge credit to the Executive Directors and our staff that we have been able to reorganise to accommodate a mix of home and office working, social distancing and other safety measures. These have allowed us to continue to serve our tenants and other stakeholders in as seamless a way as possible at very short notice. Further details of how we have responded to the virus are included in the Annual Report notably, in a separate report on our operational response to the virus, and in our discussions on risk and also the impact on the Annual General Meeting – which this year will not be possible as the usual ‘ballroom’ event, but will still permit shareholders the key aspects of voting and being able to ask questions of the Board. The detailed arrangements for the current year are described more fully in the Notice of the Meeting on pages 89 to 94. OPERATIONAL PERFORMANCE This year has seen an increase in profit after the recent falls – something that we welcome. As we have noted in the past, once properties have been purchased, their conversion into realised value is dependent on a range of factors covering timing, location of properties coming vacant and market conditions, all of which are outside the Group’s control. The key aspect that lies within our control is purchasing, in particular ensuring that the purchases are made at an appropriate value – which can mean turning down properties offered to us. During the year we had fewer purchasing opportunities which is reflected in the level of purchases made as we sought to ensure that only good quality was added to our portfolio. This keen eye on purchasing has continued into the new financial year, despite Covid-19 ,and we have been active in auctions, both buying and selling properties at prices that we would have been pleased with at any time in recent years. CORPORATE GOVERNANCE This year has also seen the full introduction of the 2018 Corporate Governance Code (the Code) and a number of pieces of legislation that have increased the disclosures in the Annual Report. We do welcome these developments and the transparency they permit. In our case we are confident that we have drawn an appropriate line between meeting the spirit of these requirements while taking account of the nature and size of the business. Our report on Corporate Governance (pages 26 to 30) describes in more detail how we have embraced the Code, including those areas where we believe we comply with the spirit, while not adhering completely to the detailed requirements. In addition, for the first time we include, as a part of our Review of Operations, a Section 172 Statement – which outlines how we engage with our various stakeholder groups, with examples of how we have taken them into account in decisions taken during the year. This year we are also putting a new remuneration policy to shareholders for approval at the AGM. Given the stable nature of the strategy and the business model, we are making a number of changes to the policy after consultation with shareholders, and to reflect emerging regulation and practice. PEOPLE I have already touched on the way that our staff have quickly re-organised and adapted to the challenges placed by the Covid-19 pandemic. I am firmly of the belief that this has been possible in large part because of workforce’s skills and long experience within the Group which meant that they were readily able to adapt to the need to work from home, while minimising disruption to services to our tenants. In this, a particular thanks has to go to our IT team for their speedy work in setting up the necessary infrastructure to permit this to happen. The Board is grateful for the skills, hard work and commitment of our people; further details of our employees can be found in the Review of Operations. THE COMING YEAR The coming year is already characterised by macro-level uncertainty as the nature of the UK’s future relationship with the EU and other countries evolves and as we face the continuing challenge of Covid-19 – both of which have the potential to affect the housing markets. As noted above, to date we have been able to continue to buy and sell at auction at what we believe to be fair and appropriate prices, and as the restrictions are relaxed and our other channels reopen we are optimistic that this is a trend that will continue. A.W.Powell Non-Executive Chairman 9 July 2020 02 Mountview AR2020.indd 2 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 Chief Executive’s Statement T R O P E R C G E T A R T S I We have had to adapt to new ways of running the office and I think that we have done so quite effectively. Those of us who can work from home do so and the office is staffed on a rota basis so that we are able to maintain social distancing and still serve our customers appropriately. Over 80% of our rents are paid directly into the bank and regulated rents are set at a modest level. Provided tenants pay their rent they have absolute security of tenure and a significant number have help from social services. Auctions are now all conducted remotely and the auctioneers are becoming more successful at replicating the ballroom atmosphere. So far this financial year we have been happy in the auction room both in terms of sale prices achieved and the prices at which we have been able to make purchases. Nobody can pretend that life is normal but our staff are coping very well. We have not had to furlough any staff or reduce staff numbers in any other way and I remain confident that our years of financial prudence will enable us to continue to conduct the business successfully and to maintain our dividend payments. Whilst I thank my staff and colleagues for their hard work, loyalty and expertise in producing increased profits for the year ended 31 March 2020 I thank them also for the willingness and good humour with which they are adapting to the strange circumstances in which we are finding ourselves. I look forward to writing this statement in more normal times next year. D.M. Sinclair Chief Executive Officer 9 July 2020 Dear Shareholder, When I wrote this statement last year I drew attention to the fact that the British People voted to leave the European Union on 23 June 2016 but every statement that I had written since then has been conscious of the uncertainties that continue pending the conclusion of our withdrawal. Happily on 12 December 2019 Boris Johnson was elected with a big majority that enabled us to leave the European Union on 31 January 2020 but the details of the withdrawal will not be certain until 31 December 2020. Now added to these uncertainties are the Covid-19 constraints the effects of which I will review later in this statement. The financial year under review ended on 31 March 2020 and the lockdown was not imposed until within ten days of that date. Given the time-lag on transactions in the property business it is fair to assume that any deal that was to conclude within those few days was already under contract before the constraints were imposed. I believe that the trading results for the year ended 31 March 2020 were not influenced by the Covid-19 pandemic and that any influence or effects should be considered as post balance sheet events. The headline figures in respect of our financial performance for the year ended 31 March 2020 are detailed under the heading “Our Performance”on page 1. Whilst Revenue has dropped by a very modest amount all the other performance indicators have shown an upward trend. Gearing has fallen from 11.3% to 7.2% and thus we are in an even stronger position to make the purchases which are essential to the future of the Company. Indeed we have made some good purchases in our new financial year. The final dividend is maintained at 200 pence per share and is payable on 17 August 2020 subject to approval at the Annual General Meeting on 12 August 2020. This will keep the total annual dividend at 400 pence per share which is slightly more generously covered 1.75 times than it was last year. And now I inevitably turn to “Stay Home, Protect the N.H.S., Save Lives” or as expressed more recently “Stay Alert, Control the Virus, Save Lives”. Our colleague Andrew Williams is a doctor and it would be wrong not to express our admiration for his unstinting work on the front line. Well done and thank you, Andrew! Mountview AR2020.indd 3 27569 7 July 2020 9:52 am Proof 22 03 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 Where we Operate KEY 34.8% London (North) 23.1% London (South) 18.1% South East Bedfordshire Berkshire Buckinghamshire Cambridgeshire Essex Hertfordshire Middlesex Norfolk Northamptonshire Oxfordshire Suffolk 14.0% South Dorset Hampshire Isle of Wight Kent Surrey Sussex 2.5% North Midlands Derbyshire Leicestershire Nottinghamshire 7.5% Remainder of England and Wales The figures on the map are calculated as a percentage of the total value of Inventories of Trading properties. 2.5% 7.5% 18.1% 34.8% 14.0% 23.1% Review of Operations The Group’s strategy and business model is simple. We are a property trading company that buys tenanted properties at a discount to estimated vacant possession value and then sells them when they become vacant. OUR PORTFOLIO Categories of property held as trading stock The Group trades in the following categories: • Regulated tenancy residential units • Assured tenancy units • Life tenancy units • Freehold and leasehold ground rent units A unit is a property, however large or small, whether freehold or leasehold, which is held subject to one tenancy. Revenue £64.9m Gross Profit £41.4m (2019: £65.4m) (2019: £40.8m) Analysis of the Group Trading portfolio by type as at 31 March 2020 Regulated, Assured Shorthold tenancies, & Other Assured tenancies Life tenancies Freehold & leasehold ground rents No. of units Cost £m 1,955 314.72 252 242 1,153 36.71 33.20 7.44 04 Mountview AR2020.indd 4 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I Analysis of the Group Trading portfolio at the lower of cost and estimated net realisable value by geographical location as at 31 March 2020 Regulated, Assured Shorthold tenancies, Assured tenancies & other £m Life tenancies £m Ground rents £m Portfolio % London (North) London (South) Bedfordshire, Berkshire, Buckinghamshire, Cambridgeshire, Essex, Hertfordshire, Middlesex, Norfolk, Northamptonshire, Oxfordshire, Suffolk Dorset, Hampshire, Isle of Wight, Kent, Surrey, Sussex Midlands, Derbyshire, Leicestershire, Nottinghamshire Remainder of England and Wales 129.64 74.53 65.43 49.37 9.14 23.32 0.60 15.08 5.24 5.45 0.55 6.28 6.27 0.85 0.15 0.07 0.10 – 34.82 23.07 18.06 14.00 2.50 7.55 SALES At Mountview, we have a relatively straightforward yet proven way of working: we buy tenanted residential properties and sell them when they become vacant. We buy both regulated tenancy and life tenancy properties. The former, which are characterised by rental returns below market value, are becoming increasingly short in supply. Since the Housing Act 1988 no new regulated tenancies have been created. Life tenancy stock has nominal rental income, is bought at a greater discount to vacant possession value and has a higher margin on sale. A key attraction of this sector to Mountview is the fact that property maintenance is usually the responsibility of the life tenant and this leads to lower ongoing costs to the Group. We carry out regular checks to ensure that all properties are maintained in good condition. During the financial year we achieved sales of £45.7 million (2019: £46.4 million), demonstrating the liquidity of the Portfolio. The average sales price achieved was £274,000 (2019: £301,000). The Group’s sales for financial years 2020 and 2019 are set out below Sales Gross sales of properties Cost of properties sold Sales price range – 2020 1 million + 500,000 – 1 million below 500,000 Sales price range – 2019 1 million + 500,000 – 1 million below 500,000 2020 £m 45.65 17.69 2019 £m 46.43 18.97 Location London & South East London & South East London & others Location London & South East London London & others No of units Sales price £m 2.0 10.7 33.0 1 15 151 No of units Sales price £m 3.3 12.2 30.9 3 19 132 Further information is provided in Note 4 to the Consolidated Financial Statements on page 59. PURCHASES The majority of our residential properties that are subject to a regulated tenancy are concentrated in London and the South East. Returns from the regulated portfolios are derived from a combination of below market rental income and trading profits on the sale of property, when the property becomes vacant and the reversionary gain is crystallised. Mountview AR2020.indd 5 27569 7 July 2020 9:52 am Proof 22 05 07/07/2020 09:53:11 Mountview Estates P.L.C. Annual Report and Accounts 2020 Review of Operations (Continued) Most properties acquired are unimproved and therefore of low average value. One of the core Mountview capabilities is to actively manage these properties: we identify opportunities to add value by carrying out refurbishments prior to their sale. The greatest gains are available at the upper end of the market and this is where we concentrate our refurbishment activities. These properties are predominantly sold by private treaty. The Group’s trading properties are carried in the balance sheet at the lower of cost and net realisable value. Net realisable value is the estimated net proceeds of sale if the property were to be vacant at the date of the balance sheet. ANALYSIS OF ACQUISITIONS The Group’s acquisitions for financial years 2020 and 2019 are set out below. The analysis does not include legal and commission expenses directly related to the acquisition of properties or any repairs of a capital nature. Year ended 31 March 2020 Regulated, ASTs, and other Assured tenancies Life tenancies Leasehold ground rents Ground rents created Total Not included in the above table: Assured tenancies created THE TABLE ABOVE INCLUDES THE FOLLOWING: Portfolios LONDON 20 Portfolio The portfolio comprised 6 regulated tenancies. Leyton Portfolio The portfolio comprised 10 regulated tenancies. Year ended 31 March 2019 Regulated, ASTs, and other Assured tenancies Life tenancies Leasehold ground rents Ground rents created Total Not included in the above table: Assured tenancies created THE TABLE ABOVE INCLUDES THE FOLLOWING: Leasehold Ground Rents Kensington, London W8 Portfolios Southern, London & South East Cost £m 13.08 1.30 0.24 0.80 – 15.42 No. of units 38 5 2 5 7 57 13 No. of units 6 Cost £m 1.77 No. of units 10 Cost £m 4.00 Cost £m 25.21 1.68 0.71 3.74 0.03 31.37 No. of units 79 8 2 2 14 105 9 No. of units Cost £m 2 3.74 No. of units Cost £m 19 6.44 06 Mountview AR2020.indd 6 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 The portfolio comprised 17 regulated tenancies and 2 assured tenancies. Epping Portfolio The portfolio comprised 9 regulated tenancies. RENTAL INCOME The Company’s rental income is derived from five different sources: No. of units Cost £m 9 3.32 T R O P E R C G E T A R T S I • Regulated tenancies • Assured tenancies • Assured shorthold tenancies • Life tenancies • Ground rents Where possible we still target those properties where the rent is capped and where our team has identified opportunities to make key improvements. For example, a relatively modest investment can ensure that a property benefits from services and amenities that have been lacking in the past. In many cases, this leads directly to a substantial increase in rental income. The operating contribution from the core business (comprising profits on sale of trading properties and rental income) is analysed in Note 4 on page 59. SUMMARY PROSPECTS FOR THE GROUP Any consideration of prospects for the current year (2020-21) is overshadowed by the impact of Covid-19 and how this will have affected our earlier plans. A full discussion of the Group’s response to the Covid-19 pandemic and the consequent Government actions is included in Review of Operations in this annual report on page 14. While Covid-19 and lockdown protocols have caused a delay in progressing sales and purchases we are achieving satisfactory results at auctions. We anticipate there will be a short-term reduction in our sales transactions leading to a delayed realisation of gains inherent in the sales of vacant properties however we expect to take advantage of good purchasing opportunities. During 2019-20, the professional knowledge and skills of our compact team ensured that we were able to purchase properties for a total of £15.42 million. Looking ahead, notwithstanding the potential slowing down of the housing market, we believe that we will identify similar opportunities in the coming months. Our strength is based on a tight focus on our core business of regulated tenancies together with a prudent operational approach. We have kept gearing low. Since the end of the financial year we have continued to sell and purchase properties through auctions and we are pleased with the results achieved. Given our financial strength, we believe that we are in a strong position to take advantage of any prime purchasing opportunities which may arise in the future. INVESTMENT COMPANIES The analysis of the investment portfolio as at 31 March 2020 is as follows: Louise Goodwin Limited A.L.G. Properties Limited 2020 27 units 4 units 2019 31 units 4 units All of the properties are situated in Belsize Park, London NW3, one of the capital’s most prestigious locations. Louise Goodwin Limited and A.L.G. Properties Limited were purchased in 1999 when we took the opportunity to build a presence in one of the best locations in London. Although rental returns have proven to be less significant than we anticipated, the investment portfolio has nevertheless generated consistently strong cash flow. When the properties become vacant, we refurbish and sell them. During the financial year, we disposed of 4 units for £4.195 million (2019: £Nil). Mountview AR2020.indd 7 27569 7 July 2020 9:52 am Proof 22 07 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Review of Operations (Continued) We will continue to maintain our strategy for the investment portfolio, deriving rental income in the short to medium term and capital through sales when units become vacant. We are prepared to refurbish the properties and sell them by private treaty to purchasers who actively seek homes in this area. The valuation of the investment portfolio decreased during the year by £969,000 (2019: increased £287,000). The properties within the investment portfolio have been revalued externally for the purpose of these accounts. The value attributed to each individual property reflects the change in its condition where appropriate and any adjustment resulting from changes in market circumstances including the impact of Covid-19. Details of the valuation of the investment portfolio are disclosed in Note 13 to the Consolidated Financial Statement on page 63. Details of environmental matters and social community issues are disclosed in note 9 in the Directors’ Report on page 19 and information on employees is disclosed in note 11 in the Directors’ Report on page 21. Information in these sections is incorporated by reference into this Strategic Report. REVIEW OF BUSINESS AND PRINCIPAL RISKS Details of the Group’s performance during the year and expected future developments are contained in the Chief Executive’s and Chairman’s Statements. The Group has the following Financial Key Performance Indicators: FINANCIAL KEY PERFORMANCE INDICATORS REVENUE (£m) 0.8% 64.9 65.4 PROFIT BEFORE TAX (£m) 0.9% 34.9 34.6 INTEREST COVER IN RELATION TO PROFIT BEFORE INTEREST AND TAXATION 36.0 56.0 33.0 2020 2019 2020 2019 2020 2019 EARNINGS PER SHARE (Pence) 1.0% NET ASSETS PER SHARE (£) 3.5% GEARING RATIO (%) 36.3 725.7 718.3 97.4 94.1 11.3 7.2 2020 2019 2020 2019 2020 2019 DIVIDEND PER SHARE (Pence) 400 400 2020 2019 08 Mountview AR2020.indd 8 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Any condition that has a greater effect on the older members of society will have a disproportionate effect on regulated tenancies as opposed to other forms of tenancy. Covid-19 has just such an effect and is likely to reduce the total population of regulated tenancies more quickly than previously anticipated. The second factor – the propensity of owners to sell - is an unknowable component as it is dependent on many subjective personal factors. Thus, if all other things are equal, then the supply may be reduced in proportion to the reduced number of regulated tenancies in existence – but there should still be properties available in the short term, though in the longer term that supply may run out sooner than if Covd-19 had not appeared. T R O P E R C G E T A R T S I 2. MARKET RISK Weak macro-economic conditions – which in our 2019 Annual Report and Accounts was linked to the impact of political / Brexit uncertainty, and for the current year has been replaced with the uncertainty associated with the outcome of negotiations on the trade deal with the EU and Covid-19. MITIGATION The Group’s exposure is weighted towards the stronger London and South East markets and this geographical area has consistently been an above-average performer. COVID-19 IMPACT As noted above, the Group’s exposure is weighted towards the stronger London and South East markets. Moreover, in the auctions that have taken place since the lockdown, sales prices for London based properties have held up. RISK REVIEW – PRINCIPAL RISKS AND UNCERTAINTIES RISKS POSED BY COVID-19 In the current climate, any discussion of risk must necessarily start by considering the impact that the Covid-19 pandemic has had and may have on the business. As a risk factor it has already had an impact on many aspects of Mountview’s operations from general market sentiment through to the very particular impact that it has had on how we work on a day to day basis. Our operational response to the virus is described on page 14. In this section we set out the impact that the virus may have on the principal risks considered in the Review of Operations. There is one key difference from the other risks to the business because, with the virus, we are not looking at a possible future risk and how that might affect the business but rather looking at the impact that it already has had and could have in the future under various scenarios of seriousness and the Government’s response. Each risk area, our standing mitigating actions and our comments on the impact of Covid-19 are shown below. 1. TRADING STOCK – REGULATED TENANCIES RISK Reduced opportunity to replace asset sales of vacant properties due to the reducing number of regulated tenancies available for purchase. MITIGATION The Group has developed clear criteria that are applied when considering asset purchases. Using these, the Group has performed creditably in replacing this class of assets in the year ended 31 March 2020, with good purchasing again during the year. The ‘Analysis of Acquisitions’ is on page 6. COVID-19 IMPACT The availability of regulated tenancies for purchase is broadly dependent on two factors - the supply of regulated tenancies as a whole and the propensity of the owners of those properties to sell. The first of these is likely to impact on the longevity of the market for regulated tenancies; the second to affect the numbers available at any one time. Mountview AR2020.indd 9 27569 7 July 2020 9:52 am Proof 22 09 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Review of Operations (Continued) 3. FINANCIAL RISK 5. PEOPLE RISK Reduced availability of financing options resulting in inability to meet business plans. MITIGATION The Group monitors its bank accounts and loans closely to maintain sufficient capacity. We review our loan facilities regularly. The Group is conservatively geared and operates well within financial covenants. Financial Key Performance indicators are on page 8. Details of the Groups current facilities are set out in Note 18 on page 65 and 66. COVID-19 IMPACT For this risk the impact of Covid-19 should be limited given that the earliest termination date for any facility is December 2022 – so under current Government projections some time beyond the expected lifetime of the Covid-19 pandemic. 4. DIVIDENDS RISK The Group seeks to provide shareholders with good returns on their investment. This aim could be put at risk if the Group was unable to sustain the level of dividends for any reason. MITIGATION We carefully monitor our strategy and our results in order to identify any risk to dividend levels. The Group maintains a strong balance sheet. With appropriate banking facilities, we are able to maintain our trading stock by taking advantage of purchasing opportunities when they occur. COVID-19 IMPACT In the short term we do not see any threat to being able to maintain dividends at their current levels. The current year’s operations have again generated good profits for the Group, which support the payment of a dividend at these levels. Capacity to maintain strategy is compromised due to inability to attract and retain suitably experienced employees. MITIGATION Mountview employs a relatively small workforce which accommodates personal interaction at all levels. The Company has a stringent recruitment process to ensure we employ appropriately skilled staff. We carry out regular appraisals and offer employees opportunities for training and development courses. The Company has a good record of long-term service, a great number of our employees have worked for the group for over 10 years. Details of employees and diversity are set out in Notes 11 and 12 of the Directors’ Report on pages 21 and 22. COVID-19 IMPACT The impact of Covid-19 adds a further risk factor which is helping staff to remain healthy through the pandemic. Given the high levels of both skill and experience of the staff and the provisions made by the Company to facilitate minimum disruption to our work practices we are meeting our operational objectives at a satisfactory level. 6. REGULATORY RISK Risk of not meeting new or changed regulatory requirements and obligations that affect the Group’s business activities and could lead to fines or penalties. MITIGATION The Group engages in close working relationships with appropriate authorities and advisers to ensure it meets its obligations. COVID-19 IMPACT None that we are aware of. 10 Mountview AR2020.indd 10 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I THE OVERALL RISK ENVIRONMENT Given Mountview’s business model and financial strength, while any risks materialising could well have a negative impact on short term performance, and lead to inconvenience, none are significant enough to threaten the continued existence of the Group. While we recognise there may be a short term negative impact as a result of Covid-19, we are confident that we can meet our strategic and operational goals and in particular are in a strong position to take advantage of purchasing opportunities as they arise. Risks are considered to be broadly unchanged from 2019 with moderate assessments for both probability of occurrence and impact. These principal risks were part of the Group’s assessment of long term viability, details of which are set out in Note 8 of the Directors’ Report on page 18. 7. OPERATIONS AND PROPERTY MAINTENANCE RISK Legal action against the Group for failure to meet its obligations under property management and safety legislation. MITIGATION In addition to its own regular inspections, the Group engages professional external companies to undertake health and safety, gas and electrical checks, fire risk assessments, etc to ensure we meet our commitments as employers and landlords. Our staff receive regular training to ensure their skills are kept up to date. To address the increasing regulatory workload, the Group recruited a Compliance Officer whose role is to monitor our performance against existing regulations and to track and prepare for new requirements as they are published. COVID-19 IMPACT In line with industry recommendations we have currently suspended non-essential visits until permissible under Government Covid-19 guidelines. As noted on page 14 in the note on the operational impact of the virus we have established a working protocol where maintenance and repair work is essential. For work that remains necessary to carry out, the principal risk arising under this heading arises from staff shortages – both within our staff and within our contractor group who carry out the sub-contracted safety and other inspections and maintenance work. In relation to our own staff the point has been discussed in risk 5 above. In relation to sub- contractors we have a wide panel of sub-contractors that we could call on, and in addition contact details of other contractors who could carry out work for us. Accordingly we are confident that any shortfall in staff at contractors could be covered either by re-scheduling work or through expanding the current contractor base. Mountview AR2020.indd 11 27569 7 July 2020 9:52 am Proof 22 11 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Review of Operations (Continued) SECTION 172 STATEMENT RELATIONS WITH SHAREHOLDERS AND OTHER STAKEHOLDERS The Board recognises that effective engagement with our stakeholders is a key part of our operations and meeting our strategy. Following the increased profile given to stakeholder engagement associated with the 2018 Code, and in support of the matters set out in Section 172(1) of the Companies Act 2006 we have reviewed our stakeholder group and for each major group codified how we engage with them. This work has created a clear framework for the Board to work with when taking material decisions as it provides a checklist to ensure we identify and consider those who could be affected. The listing below shows the different groups and outlines the nature of our engagement with them. Intuitively the Board has for many years taken account of the various stakeholder groups when considering major decisions. The framework provides us with a tool to help ensure that in major decisions we do consider the relevant stakeholder groups, and has been used during the year, for example: • Acquisition of properties when offered portfolios and considering which properties we make an offer on; • Maintenance in deciding on the scope of works and the contractors to engage; • Other financial decisions for example those related to remuneration of all staff, dividends and banking facilities needed; and • Planning and agreeing the Group’s response to the Covid-19 pandemic including the impact on staff, tenants and other stakeholder groups as described on page 14. The Board keeps our stakeholder framework under regular review and update as we identify new groups or changes to the nature, scope or extent of engagement with existing groups. STAKEHOLDER GROUPS AND NATURE OF OUR ENGAGEMENT: 1. SHAREHOLDERS • In addition to reporting formal financial results twice a year, the AGM presentation and discussion and RNS announcements throughout the year, the Chairman and other members of the Board hold ad hoc meetings on request with shareholders. This includes annual meetings with the major shareholders to gather their views on the company strategy and operations. In the current year we also consulted the largest shareholders on proposed revisions to our Remuneration Policy. Shareholders of all sizes contact us throughout the year by letter, phone or e-mail. We respond to questions on an individual basis or by RNS depending on the nature of questions asked. 2. EMPLOYEES • Section 11 in the Directors’ report explains the arrangements in place to enable the Company’s staff to engage with the Board. Given the size of the Company’s workforce, rather than adopting one of the methods of engagement in provision 5 of the Code, the Board reviewed and determined that the current arrangements are sufficient. 3. CONTRACTORS AND SUPPLIERS • All contractors are subject to thorough review by our property management team when first appointed and periodically thereafter. All contractors must sign up to our Contractor Code of Conduct. Similarly, all consultants or advisers are subject to review by the Board before appointment. Major appointments – such as the Auditors are subject to a formal tender process and annual appointment. Regular contact between the part of the business that engages the contractor/ supplier means that we are able to provide and receive feedback to improve the level of service going forward. 4. FUNDERS – BANKS • The CFO holds regular meetings with our principal banks. At the time that facilities are renewed the CEO and CFO negotiate the new agreement. 12 Mountview AR2020.indd 12 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I 5. CUSTOMERS – TENANTS AND BUYERS REGULATED TENANCIES 8. LOCAL GOVERNMENT • We liaise with various local government bodies • These tenants form the bulk of our ‘customers’. We engage with them periodically in relation to services in the properties, and when necessary to ensure our compliance with all obligations. OTHER TENANCIES • Day-to-day engagement with these tenants tends to be through the property management team in relation to maintenance or the renewals team when tenancies are up for renewal. BUYERS AT VACANT POSSESSION • These buyers tend to be one-off purchases so that we do not have on-going relationships with buyers. We maintain a close working relationship with the auction houses and estate agents through whom we sell properties. 6. CORPORATE REGULATORY BODIES • This group includes the FRC, FCA and others who are responsible for developments relevant to our listing and reporting to our shareholders and others. Their role includes changes in law, accounting and auditing standards and any other relevant matters. We regularly review issuers websites to remain informed on changes to regulation; similarly our various external advisers also alert us to developments that they believe should be brought to our attention. These reviews will be followed by ad hoc contact as and when needed for clarification. We also assist, when requested, in the periodic quality reviews carried out by the FRC and others. 7. OPERATIONAL REGULATORY BODIES • These bodies include the Gas Safe Register, the Health and Safety Executive, The Environment Agency and others. For all, in addition to responding to periodic updates, we monitor their websites to remain current on changes to regulation for their application to Mountview, followed by ad hoc contact as and when needed for clarification. We have appointed an external consultant to provide Mountview with its own Health and Safety policy which our contractors agree to abide by. This is monitored by the external consultant. and review their websites on a need to know basis. Departments in local Government that we may contact on a property specific basis include Social Services & Environmental Health. We are currently using the Ministry of Housing, Communities & Local Government website in order to ensure compliance with Energy Performance Certificates. We also have regular contact with rent officers on matters concerning rent, property condition and maintenance and other matters that may arise on an ad-hoc basis and periodic contact with local planning officers as and when works on properties, including trees with TPOs, need permission before work can start. 9. PROFESSIONAL ADVISERS CORPORATE ADVISERS INCLUDING AUDITORS • We have long standing relationships with the advisers noted on page 15. We work with them on a combination of retainer or ad hoc basis as they assist when matters relevant to their area of expertise arise – including input to the Annual Report and Accounts and related market communications. Our engagement with the auditors is set out in the Report of the Audit and Risk Committee on pages 31 to 34. In addition we work with a range of other external specialists as needed. For example in the current year this has included working with FIT remuneration consultants as described in the Remuneration Report, Allsops on the valuation of investment properties (see Note 13 on page 63), and Winckworth Sherwood LLP on employment matters. OPERATIONAL ADVISERS • These advisers include the legal advisers that we work with, notably on property transactions, and auctioneers and agents who form an essential part of the sales process when properties become vacant. 10. LOCAL COMMUNITIES • We engage early with local communities when maintenance work could affect them for example location of skips or disruption during works. Where possible when maintenance work is needed on our properties we employ well regarded locally based contractors who meet the criteria in our code of conduct. Mountview AR2020.indd 13 27569 7 July 2020 9:52 am Proof 22 13 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Review of Operations (Continued) OPERATIONAL RESPONSE TO COVID-19 The Covid-19 pandemic was declared on March 11, with the UK’s ‘lock-down’ starting on the 23rd – shortly before the Company’s financial year end. Serving and assisting our tenants during these challenging times became our priority and thus we took the steps outlined below to minimise disruption as far as was possible. We continue to undertake all obligatory inspections/tests where access to the property is agreed in advance with the tenant. Where we are unable to obtain consent to carry out the inspections/tests the reason why is documented to demonstrate that we have taken all reasonable steps to satisfy our obligations. PERSONNEL: In compliance with the Government guidelines we support our staff working from home. Steps taken to facilitate this while minimising the disruption to operations included: • extending remote capability to permit staff to access all their usual business applications and files from their personal devices. • enabling call forwarding to permit office calls from/to their personal mobile phones. • providing training and guidance where required for using these services. We identified those staff who were themselves, or through their family, in the high risk groups. These staff were instructed to self-isolate for 12 weeks as required by the Government. Where it is essential to come to the office we have introduced a strict staff rotation policy to ensure social distance rules are obeyed, increased the cleaning and hygiene regime, provided anti-bacterial and sanitisation products, face masks and safety gloves for staff use. Property inspections and site visits are conducted only when essential and observance of social distance is crucial. PROPERTY MAINTENANCE: All contractors with whom we have worked over the last 2 years were contacted to secure their compliance with our policy for adherence to Government guidelines on safe working. This policy includes wearing facemasks, protective gloves, ensuring social distance and essential hygiene practices. Given the elderly profile of our tenants (a high risk category) compliance with this policy is especially important. We have deferred non urgent works while dealing with emergencies and essential remedial work in agreement with the tenant. Contractors are obliged to respect our tenants’ wishes with regard to social distancing and self-isolation. RENT: We are working with tenants, on a case by case basis, to advise on the help and assistance available to them as a result of loss of income through Covid-19. We establish the facts in each case and, if necessary, agree a payment plan to safeguard their tenancy while ensuring we are compliant with Government guidelines. AUDIT: The planning for the year end audit was already underway when the lockdown restrictions were imposed. We revised arrangements so that the audit could be conducted remotely in compliance with Government, FRC and FCA guidelines. As a result we have not needed to amend our timetable for the audit or for the production of the annual report. ANNUAL GENERAL MEETING: The arrangements for the current year’s AGM have been modified in accordance with Government guidelines in respect of Covid-19 and are detailed in section 23 of the Directors report on page 24 and in the Notice of Meeting on page 89. Approved and agreed on behalf of the Board by: D.M. Sinclair Chief Executive Officer 9 July 2020 14 Mountview AR2020.indd 14 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I Directors and Advisers as at the date of this Annual Report and Accounts MR D.M. SINCLAIR FCA (CEO) Joined the Company as Company Secretary in 1977, became a Director on 1 January 1982 and succeeded his late father as Chairman on 5 June 1990. Retained the position of Chief Executive (‘CEO’) when the roles of Chairman and CEO were split into separate roles in 2013. Fellow of the Institute of Chartered Accountants in England and Wales. MRS M.M. BRAY FCCA (CFO) Joined the Company in 1996 and became Company Secretary. Became a Director on 1 April 2004. Fellow of the Association of Chartered Certified Accountants. NON-EXECUTIVE DIRECTORS MR A.W. POWELL FCA FIMC* (CHAIRMAN) Joined the Company as Non-Executive Director on 1 April 2018, assumed the role of Acting Chairman on 31 March 2019, and was confirmed as Chairman on 19 November 2019. Mr Powell is a fellow of the Institute of Chartered Accountants in England and Wales and a fellow of the Institute of Management Consultants. * Mr A.W. Powell was considered at the time of his appointment in 2018 to be independent for the purposes of the UK Corporate Governance Code. MS M.L. ARCHIBALD MRICS* (FORMERLY JARVIS) (CHAIR OF THE REMUNERATION COMMITTEE) Joined the Company as a Non-Executive Director on 1 July 2014. Member of the Royal Institution of Chartered Surveyors. She has held various roles with property advisers, including Jones Lang LaSalle, and now acts as an adviser to clients in a range of property sectors, including residential and commercial property. * Ms M.L. Archibald is considered to be independent for the purposes of the UK Corporate Governance Code. DR A.R. WILLIAMS Joined the Company as a Non-Executive Director on 1 December 2015. Andrew is a qualified member of the medical profession, and a member of the Sinclair concert party. He represents the interests of the family and private shareholders generally. SECRETARY AND REGISTERED OFFICE Mrs M.M. Bray FCCA Mountview House, 151 High Street, Southgate, London N14 6EW BANKERS HSBC Bank Plc 1-3 Bishopsgate London EC2N 3AQ Barclays Bank PLC One Churchill Place, London E14 5HP AUDITORS BSG Valentine (UK) LLP Lynton House, 7–12 Tavistock Square, London WC1H 9BQ SOLICITORS Norton Rose Fulbright LLP 3 More London Riverside, London SE1 2AQ REGISTRARS AND TRANSFER OFFICE Link Asset Services (UK) Limited The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU BROKERS N+1 Singer One Bartholomew Lane, London EC2N 2AX FINANCIAL ADVISERS SPARK Advisory Partners Limited 5 St John’s Lane, London EC1M 4BH Mountview AR2020.indd 15 27569 7 July 2020 9:52 am Proof 22 15 07/07/2020 09:53:12 Mountview Estates P.L.C. Annual Report and Accounts 2020 Directors’ Report The Directors (as listed on page 15) have pleasure in presenting to the Members their 83rd Annual Report together with the Financial Statements for the year ended 31 March 2020. Additional information which is incorporated by reference into this Directors’ Report, including information required in accordance with the Companies Act 2006 can be found as follows: Disclosure Location Financial risk management objectives and policies Statement of Directors’ responsibilities Directors’ interests in share capital Compensation for loss of office arrangements. Notes to the financial statements, pages 58 and 59 page 25 Remuneration Report, page 46 Remuneration Report, page 41 For the purpose of LR 9.8.4R, the only information required to be disclosed can be found in the following locations: Disclosure Location Agreements with controlling shareholder Directors’ Report, Note 21, page 23 All other sub-sections of LR 9.8.4R are not applicable. 1. RESULTS AND DIVIDENDS The results for the year are set out in the Consolidated Statement of Comprehensive Income on page 49. The Directors recommend the payment of a final dividend of 200 pence per share. The dividend will be paid on 17 August 2020, subject to approval at the Annual General Meeting (AGM) on 12 August 2020, to shareholders on the register at the close of business on 10 July 2020. Our proposals for running the AGM this year, in the light of the Covid-19 provisions are outlined in section 23 below. Details of the AGM, including the notice of AGM, are set out on pages 89 to 94. 2. OUR PURPOSE AND HOW WE OPERATE Mountview’s core purpose is to acquire and maintain regulated tenancy residential property providing below market rent accommodation for our tenants until we get vacant possession when we sell such properties. In meeting this purpose, the Group has a long established strategy, business model and set of operating procedures. All these have been developed and refined by marrying the values of the founders and the knowledge and experience of our executives and staff with the evolving environment that we operate in. The strategy and business model are reviewed annually and discussed with major shareholders the majority of whom have confirmed their support for the Company to continue to operate unchanged. Our key strengths that underpin our culture and support our continuing success are: • Our team’s experience and knowledge of their sector and the communities we operate in • A long-term view, underpinned by family values and ownership • A conservative approach to financing, and management of our cost base • Investing responsibly to maintain our existing assets and acquire new assets • Operating responsibly in the communities we serve We describe on pages 12 and 13, our section 172 Statement, how and where we engage with our wider stakeholder group and our impact on local communities – for example through seeking local contractors where possible to aid proximity between suppliers and tenants and retain the economic benefits within the local community. 16 Mountview AR2020.indd 16 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I 3. ACTIVITIES The principal activities of the Company and its subsidiary undertakings are as follows: PARENT COMPANY Mountview Estates P.L.C. Property Trading Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 328020 SUBSIDIARY UNDERTAKINGS (WHOLLY OWNED) Hurstway Investment Company Limited Property Trading Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 344034 Louise Goodwin Limited Property Investment Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 691455 A.L.G. Properties Limited Property Investment Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 508842 4. BOARD OF DIRECTORS The names of the current Directors, along with their details, are set out on page 15 and are incorporated into this report by reference. Mr A.W. Powell became the acting Non-Executive Chairman on 31 March 2019 and subsequently his appointment as Non-Executive Chairman was confirmed on 19 November 2019. 5. APPOINTMENT AND RETIREMENT OF DIRECTORS The appointment and retirement of Directors is governed by the Company’s Articles of Association, the 2018 Corporate Governance Code, the Companies Act 2006 and related legislation. Further details are set out in the Corporate Governance section on page 28. The Board has power to appoint an additional Director to fill a casual vacancy amongst the Directors. Any such Director holds office until the next AGM and may offer himself/herself for election. In accordance with the 2018 Corporate Governance Code all Directors will seek re-election at the 2020 AGM. 6. SHARE CAPITAL The authorised share capital of the Company as at 31 March 2020 was £250,000 divided into 5,000,000 Ordinary Shares of 5p, of which 3,899,014 were in issue (2019: 3,899,014). As at 9 July 2020, there has been no change in the issued share capital. The rights and obligations attaching to the Company’s shares, as well as the powers of the Company’s Directors, are set out in the Company’s Articles of Association, a copy of which can be viewed on the Company’s website at www.mountviewplc.co.uk. There are no restrictions concerning the transfer of shares in the Company, no special rights with regard to control attached to the shares, no agreements between holders of shares regarding transfer known to the Company and no agreement which the Company is party to that affects its control following a takeover bid. Changes to the Company’s Articles of Association must be approved by shareholders in accordance with the Articles of Association and legislation in force from time to time. Mountview AR2020.indd 17 27569 7 July 2020 9:52 am Proof 22 17 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Directors’ Report (Continued) 7. NOTIFIABLE INTERESTS IN SHARE CAPITAL As at 9 July 2020, the following disclosures of major holdings of voting rights have been made (and have not been amended or withdrawn) to the Company pursuant to the requirements of Chapter 5 of Disclosure Guidance and Transparency Rules: Mr Phillip Wheater, Mr David Wright and Mr Alistair Sinclair, Trustees of the Frank and Daphne Sinclair Grandchildren Settlement* Mr C. Murphy** Mrs M.A. Murphy** including: • BBTJ 400,000 • ALFL Ltd 79,350 Mrs E. Langrish-Smith** Mrs A. Williams** Mrs S. Simkins** Talisman Dynamic Master Fund Ltd* * Denotes indirect holding. ** Denotes combined direct and indirect holding. Ordinary Shares of 5p each % of Issued Share Capital 393,193 117,143 596,745 307,000 139,075 148,220 221,937 10.08 3.00 15.31 7.87 3.57 3.80 5.69 8. VIABILITY STATEMENT The Directors have assessed the viability of the Group over the three year period to 31 March 2023. The Directors conducted this review taking account of the Group’s current position, longer term strategy, principal risks and future plans. A three year period is considered appropriate for the assessment as it corresponds with the Group’s internal planning period and, in addition the term of the debt facilities supports an assessment over this period. The strategy of the business is set at Group level and is reviewed throughout the year at Board meetings in the light of market conditions and investment opportunities. This strategy is based on a tight focus on our core business of regulated tenancies, together with a prudent approach to key financial ratios and funding requirements. The Board has developed a matrix of risks which it now considers at each meeting. The principal operational risks faced by the Group and their mitigation are described in the Review of Operations on pages 9 to 11. The Group’s Financial Risk Management Objectives and Policies are shown in Note 3 on pages 58 and 59 Notes to the Consolidated Financial Statements. The consolidated risk register is maintained by the Audit and Risk Committee as described in the Report of the Audit and Risk Committee on page 32. In assessing viability, the Directors considered the principal risks (see pages 9 and 11) in severe but plausible scenarios, their potential impact and how to manage them. In the current year this specifically included scenarios reflecting different durations and impacts of Covid-19 and the Government’s restrictions in relation to the lock down. On the basis of this and other matters considered and reviewed by the Board during the year, the Board confirms that it has reasonable expectations that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period used for the assessments. The Directors consider the following factors to be key to this assessment: • The Group’s properties are attractive to a broad constituency of buyers and can be marketed through different channels if needed • The Group’s rental income is sufficient to cover expenses in the event of market illiquidity • The Group has strong reserves and low indebtedness, which would enable it to take profitable advantage of adverse market conditions • Contingency and succession planning to cover the unexpected absence of key members of staff is ongoing. Given Mountview’s strong financial position the Directors consider that it is well positioned to take advantage of both favourable and adverse market conditions. The Group also has adequate banking facilities in place over a spread of maturities which could be renegotiated, augmented or replaced if necessary within the required timescales. 18 Mountview AR2020.indd 18 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 9. ENVIRONMENTAL MATTERS AND SOCIAL/COMMUNITY ISSUES Given the size of the Group and the nature of its business as a property trading company, the Group does not currently have any specific policies in place in relation to environmental, social, human rights or community issues, but keeps these issues under review. 10. GREENHOUSE GAS EMISSIONS DISCLOSURE INTRODUCTION The directors of Mountview Estates P.L.C are required to report its energy consumption and greenhouse gas (GHG) emissions as part of its Annual Report and Accounts, in accordance with the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, also known as Streamlined Energy and Carbon Reporting (SECR). Mountview engaged EcoAct Ltd (EcoAct), formerly Carbon Clear Ltd, to calculate its energy consumption and carbon footprint for the reporting period of 1 April 2019 to 31 March 2020. T R O P E R C G E T A R T S I EcoAct’s scope of work was to: • Define the reporting boundary and collect the required data; • Calculate Mountview’s energy consumption and carbon footprint; • Report the results. EcoAct is a world-leading carbon management consultancy with a proven track record of helping organisations to measure, reduce and offset their carbon emissions. EXECUTIVE SUMMARY Total gross GHG emissions in the reporting period were 80.9 tCO2e, which can be attributed as follows: • Direct Emissions (Scope 1) 44.0 tCO2e or 54% of the total • Indirect Emissions (Scope 2) 22.5 tCO2e or 28% of the total Indirect Other Emissions (Scope 3) 14.4 tCO2e or 18% of the total. • The results are presented below: Figure 1: Total Emissions Broken Down by Activity and Scope Type of Emissions Direct (Scope 1) Activity Natural Gas Company Owned Vehicles Subtotal Indirect (Scope 2) Indirect (Scope 3) Electricity Subtotal WTT (All Scopes) Subtotal TOTAL (tCO2e) tCO2e 17.2 26.8 44.0 22.5 22.5 14.4 14.4 80.9 % of Total 21% 33% 54% 28% 28% 18% 18% 100% 1. 2. Under the Mandatory Greenhouse Gas Regulation, a company is required to report its scope 1 and 2 emissions. It is not mandatory to report scope 3 emissions. An operational control boundary was used to calculate Mountview’s carbon footprint. Mountview AR2020.indd 19 27569 7 July 2020 9:52 am Proof 22 19 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Directors’ Report (Continued) 10. GREENHOUSE GAS EMISSIONS DISCLOSURE CONTINUED Figure 2: GHG Emissions (tCO2e) by Activity (2019-20) 30 22.5 26.8 14.4 17.2 20 10 0 Electricity Company Owned Vehicles Well To Tank (WTT) Natural Gas Figure 3: Emissions Intensity Metrics Figure 3 shows a year-on year comparison of emissions intensities using revenue and number of FTEs as normalisation factors: Intensity Metric Total Emissions (tCO2e) Revenue (£’mil) Number of employees tCO2e per employee tCO2e per £’mil turnover 2019/20 80.9 64.9 29 2.8 1.25 2018/19 % Change 89.5 65.4 29 3.1 1.37 -9.6% -0.8% 0.0% -9.6% -8.8% Total emissions normalised by the number of employees decreased by 9.6%, in line with the equivalent decrease in overall emissions, whereas total emissions per million £ of turnover, decreased by 8.8%. YEAR-ON-YEAR ANALYSIS Emissions produced by Mountview have decreased by 9.7% compared to last year from, 89.5 tCO2e to 80.9 tCO2e. Scope 1 emissions have decreased by 7%, from 47.3 to 44.0 tCO2e compared with the previous reporting year. This is due to: • Emissions from company-owned vehicles have decreased by 14.9%. This is mainly driven by a decrease in annual mileage of 9%. • A 8.3% increase in natural gas consumption at the office. Scope 2 emissions have decreased by 13.9% compared to the previous reporting year. This can be attributed to: • A 10% decrease in the emission factor for UK grid electricity. • An overall 5% decrease in electricity consumption. 5% at the office and 7% reduction in estimated electricity consumption in the managed flats. Emissions from electricity accounts for 27.8% of Mountview’s overall carbon footprint. In addition to its head office, Mountview are also responsible for electricity use in the communal areas of 24 managed blocks of flats. Emissions have been estimated for these flats using the following assumptions: • The company pays an average £37 electricity charge per managed flat towards communal areas. • The company covers communal area charges for 24 properties. • The average electricity standard rate is 16.9p/kWh. This is based on the average price of electricity purchased by non-domestic consumers in the UK with “very small” properties, for the last 3 quarters of 2019. 20 Mountview AR2020.indd 20 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 T R O P E R C G E T A R T S I 10. GREENHOUSE GAS EMISSIONS DISCLOSURE CONTINUED REFERENCES The following sources have been used for the completion of this document: • • ‘UK Government GHG Conversion Factors for Company Reporting’ for 2019, released by Department for Business, Energy and Industrial Strategy and Department for Environmental Food and Rural Affairs, as found in https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2019. ‘Prices of fuels purchased by non-domestic consumers in the UK’, Table 3.4.2, March 2020, Department for Business, Energy & Industrial Strategy, as found in https://www.gov.uk/government/statistical-data-sets/gas-and-electricity-prices- in-the-non-domestic-sector. CLIMATE CHANGE: As an asset owner and manager Mountview sits at the top of the investment chain and uses this position to influence those that we work with in relation to factors such as air pollution and energy uses. We do this in a number of ways including: • Using local contractors wherever possible to reduce travel needed • Converting lighting to ‘eco-lamps’ where possible • We have obtained an Energy Performance Certificates (E.P.C.) for over 80% of properties in our portfolio and in so doing we have undertaken, where necessary, loft insulation, cavity wall insulation, provision for storage heaters and dual plate power meters In conjunction with our external advisers, we continue to monitor developments in relation to Climate Change. 11. EMPLOYEES Notwithstanding that the Group’s strategy, business model and operations are long established with well developed underlying processes that reflect our business drivers, the performance of the business could not be sustained without a strong, skilled and knowledgeable workforce who enjoy their work at Mountview. This is manifested in one statistic in particular which is the average time in role of our staff – which currently stands at over 10 years. The Group has family roots and it is our belief that a similar feel remains today within what is a small and highly skilled workforce of 24 staff plus the Directors. This is an environment in which every member of staff meets and talks with one or both of the Executive Directors, if not on a daily basis then on a weekly basis. In view of the size of the Group and the regular contact with all staff, more formal means of employee engagement are not considered appropriate at this time. This matter will be kept under regular review. This regular contact fosters an environment in which staff can air concerns. It is also the case that staff know that if there was any matter that they felt might be sensitive to raise within the operational side of the business that they can approach any of the Non-Executive Directors (NEDs) to discuss the matter. In this regard the Group has policies on whistleblowing and related policies on bribery, gifts, conflicts of interest and related matters that are included in the staff manual, explained to new staff on joining and are reviewed annually for continued suitability by the Audit and Risk Committee who report to the Board on this matter. It is a standing item on the Board agenda to report, receive a report on and consider any reporting made under these provisions – and during 2019-20 no incidents were reported. TRAINING: The Group provides regular training related to the use of computer software and for the general professional development of the staff concerned. For example we provide appropriate training when there are developments in relevant legislation, regulation or practice. We encourage all of our staff to continue their education and support staff following courses aimed at gaining professional qualifications. Mountview AR2020.indd 21 27569 7 July 2020 9:52 am Proof 22 21 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Directors’ Report (Continued) 12. DIVERSITY Mountview is committed to employing and retaining a skilled workforce with a diversity of qualifications and talents from a variety of backgrounds. Whilst Mountview does not have a formal diversity policy, the company is committed to equal opportunities for all and that recruitment and selection be strictly on the basis of merit and ability. As at 31 March 2020, the Group had one female Executive Director, Mrs Marie Bray, who has been on the Board since 2004, and one female Non-Executive Director, Ms Mhairi Archibald, who has been on the Board since July 2014. Female Board membership represented 40% of the Board. The Group has seven Senior Managers (who are not Directors), three of whom are female. Of the 29 total employees in the Group, 11 are male and 18 are female. 13. SIGNIFICANT AGREEMENTS Certain banking agreements to which the Group is a party (described in Note 18 to the Consolidated Financial Statements) alter or terminate upon a change of control of the Group following a takeover bid. There are no other significant agreements to which the Group is a party that take effect, alter or terminate upon a change of control of the Group following a takeover bid. There are no contractual or other agreements or arrangements in place between the Group and third parties which, in the opinion of the Directors, are essential to the business of the Group. 14 DIRECTORS’ INTERESTS IN CONTRACTS There was no contract in existence during or at the end of the financial year in which a Director of the Company is, or was, materially interested, and which is or was significant in relation to the Group’s business. 15. DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE The Company purchases liability insurance covering the Directors and Officers of the Company and its Subsidiary undertakings and this has been in place throughout the financial year under review. The Company’s Articles of Association at Article 163 permit the provision of indemnities to the Directors (at the discretion of the Board), which constitute qualifying third party indemnity and qualifying pension scheme indemnity provisions under the Companies Act 2006. 16. CORPORATE GOVERNANCE The Directors’ statement on Corporate Governance is set out on pages 26 to 30. 17. HEALTH AND SAFETY The Group is committed to achieving a high standard of health and safety. The Group regularly reviews its health and safety policies and practices to ensure that appropriate standards are maintained. The gas supply and appliances within all of the Group’s relevant residential properties are independently inspected under the Gas Safety (Installation and Use) Amended Regulations 1996 and certificates of compliance obtained. Similarly there is a regular programme of electrical inspection which is due to cover all of our properties by April 2021, and fire and health and safety inspections. Where these reviews highlight actions that are needed by either the Group or the tenants we undertake that work or facilitate the work being done by the tenants. 18. GOING CONCERN BASIS The Directors continue to adopt the going concern basis in preparing the accounts. The financial position of the Group including key financial ratios is set out in the Review of Operations on page 8. The Group is historically profitable, has considerable liquidity and regularly reviews its long-term borrowing facilities with its lenders. As a result, the Directors believe the Group is very well placed to manage its business risks successfully and have a good expectation that both the Company and the Group have adequate resources to continue their operations. 22 Mountview AR2020.indd 22 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 19. AUDITORS Messrs BSG Valentine (UK) LLP have indicated their willingness to continue in office and a resolution for the reappointment of BSG Valentine (UK) LLP as Auditors for the ensuing year will be proposed at the AGM. 20. AUDITORS AND DISCLOSURE OF INFORMATION TO THE AUDITORS So far as each Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware. Each Director has taken the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. T R O P E R C G E T A R T S I 21. RELATIONSHIP AGREEMENT In accordance with the UK Financial Conduct Authority’s Listing Rules (the Listing Rules), the Company has entered into an agreement with the Sinclair family concert party, which, as it controls more than 30% of the Group’s total issued share capital, is deemed a controlling shareholder. The relationship agreement is intended to ensure the controlling shareholder complies with the independence provisions in the Listing Rule 9.2.2A. Under the terms of the relationship agreement, the Principal Concert Party Shareholder, Mr D.M. Sinclair (a member of the Sinclair family concert party), has agreed to procure the compliance of other individual members of the Sinclair family concert party who are treated as controlling shareholders with independence obligations contained in the relationship agreement. The Sinclair family concert party, as controlling shareholders of the Company have a combined aggregate holding of over 50% of the Company’s voting rights, the cumulative holdings reflect a reduction from the corresponding figure as at 31 March 2019 as a result of a disposal of certain interests. The Board confirms that, since the entry into the relationship agreement as at 9 July 2020, being the latest practicable date prior to the publication of this annual report and accounts: • the Company has complied with the independence provisions included in the relationship agreement; • so far as the Company is aware, the independence provisions included in the relationship agreement have been complied with by the Sinclair family concert party and their associates; and • so far as the Company is aware, the procurement obligation included in the relationship agreement has been complied with by the Principal Concert Party Shareholder. 22. GENERAL MEETING At the AGM held on 7 August 2019, the resolutions concerning the re-election of both Mr A.W. Powell and Mrs M. L. Jarvis (now Archibald) as directors of the Company did not receive support of a majority of the independent shareholders who voted, which is now a requirement of the Listing Rules where the Company has a controlling shareholder, and therefore Mr Powell and Mrs Jarvis stood for re-election at a general meeting held on 18 November 2019 (General Meeting). Both Mr Powell and Mrs Jarvis were re-elected at the General Meeting. Between the 2019 AGM and the General Meeting certain Board members met with a number of major shareholders. All shareholders (including the Sinclair family concert party members) were entitled to vote on the resolutions to re-elect Mr Powell and Mrs Jarvis at the General Meeting. As reported through the RNS market information system, following the 2019 AGM and prior to the General Meeting , the Company identified as far as possible those shareholders who did not support the various resolutions and attempted to engage with them to seek their views. They declined to meet or engage. The Company remains committed to shareholder engagement and we will continue to offer to meet with shareholders to take into account their concerns and considerations in the future. Mountview AR2020.indd 23 27569 7 July 2020 9:52 am Proof 22 23 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Directors’ Report (Continued) 23. GENERAL MEETING – 2020 AND THE IMPACT OF COVID-19 At the time of publication of this report there is the risk associated with holding a physical AGM during the time of social distancing and the various other provisions that follow from Covid-19. We are monitoring the announcements by Department of Business, Energy and Industrial Strategy, Financial Conduct Authority and the Financial Reporting Council and others on this matter and are following their advice when taking decisions on holding physical meetings – starting with, but not limited to the current year’s AGM. The current situation following the enactment of the Corporate Insolvency and Governance Act 2020 (CIGA) supports the previous guidance and this, together with the continuing risk of rapid and localised ‘lockdowns’ means that your Board has taken the decision that a conventional AGM is not practical in the current year. The alternative arrangements for the AGM, including asking questions and voting are set out in the Notice of Meeting in pages 89 to 94. The Directors’ report was approved by the Board on 9 July 2020 and is signed on its behalf by: M.M. Bray Company Secretary 9 July 2020 24 Mountview AR2020.indd 24 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. The Directors are required by the Companies Act 2006 to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year, and of the profit or loss of the Group for the financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’) and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether IFRS as adopted by the EU and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Parent Company financial statements respectively; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company. This will enable them to ensure that the E C N A N R E V O G financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They also have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s and the Company’s position, performance, business model and strategy. Each of the Directors, whose names and functions are set out on page 15, confirms that, to the best of their knowledge: • • the financial statements, which have been prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and the Strategic Report contained within this document includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces. By Order of the Board M.M. Bray Company Secretary 9 July 2020 Mountview AR2020.indd 25 27569 7 July 2020 9:52 am Proof 22 25 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Corporate Governance 2018 UK CORPORATE GOVERNANCE CODE The Company applies the principles and complies with the provisions set out in the 2018 UK Corporate Governance Code (the Code) as issued by the Financial Reporting Council (FRC), a copy of which can be found at www.frc.org.uk/corporate/ ukcgcode.cfm. For the year ended 31 March 2020 we complied with provisions of the Code except as disclosed in this section. As a Board we take our responsibilities in relation to corporate governance very seriously, seeking to implement governance processes that reflect both the prevailing Code and the Company’s circumstances and structure. Following the introduction of the 2018 Code it has been a regular agenda item for the Board as we explore the steps that we may take to meet the principles and provisions of the Code. Last year we adopted a number of the recommendations including asking all Directors to stand for re-election. This year with the ongoing support of Prism Cosec, our corporate governance consultants, and our other advisers we have continued to strengthen our governance processes and reporting. We are mindful that our structure, which has evolved through our history and is aligned with our culture and values, is not fully compliant with some of the measures in the Code. Taking account of the Code in the context of our size, our shareholdings and the nature of our operations where we have a focused, stable and enduring strategy, and stable workforce and suppliers, we have looked at each of the principles and provisions of the Code to consider the spirit behind them as well as the actual wording used. We are of the view that throughout we are operating within the spirit behind the principles of good corporate governance – in a manner that is appropriate to our business, our size and our economic footprint. In particular, as a small Board, we recognise that there are matters concerning the size and composition of the Board that fall into this category. The Board and also shareholders, when consulted, are at one with their view that new Board positions should be created only when there is a clear need and when the appointee will add capacity or skills that are needed by the business in order for it to continue to pursue its strategy. Below we note the areas where we believe we comply with the spirit of the Code but do not currently adhere completely to the detailed requirements. These matters are kept under constant review as a whole, by the Board. Should there be a material change in the Company’s strategy, business model or structure then these points would be re-visited and, after consulting with shareholders on proposals, we would make such changes as are appropriate given the changed circumstances. INDEPENDENT NON-EXECUTIVE DIRECTORS (NEDS): (SECTION 2 PROVISION 11) The number of independent NEDs is currently less than at least half the Board as required by the Code. This is a matter which the Board and the NEDs have reviewed in the context of the skills needed either directly on the Board or indirectly through advisers and concluded that given the size of the Company and the stable nature of its strategy, business model and operations, the current composition, with two independent NEDs and three NEDs in total supported by external advisers, is appropriate. APPOINTMENT OF A SENIOR INDEPENDENT DIRECTOR (SID): (SECTION 2 PROVISION 12) Currently other than the Chairman, the Company has one Independent NED and the Board has concluded that it is too small to merit the appointment of a SID. COMPOSITION OF COMMITTEES IN GENERAL: (SECTION 3) The Board is small and thus the composition of each of the Committees is limited by the available pool of Directors. As noted above, should it be concluded that appointing further Independent NEDs was appropriate and would bring value, then composition of Committees would be reviewed. ROLE CONCURRENCE – AUDIT COMMITTEE: (SECTION 4 PROVISION 24) The Chairman of the Board is also the Chairman of the Audit and Risk Committee. The Board consists of 60% Accountants and the Board has determined that there is no need to appoint a further NED with financial experience. The Board, and separately the NEDs, have considered the Chairman’s role on the Audit and Risk Committee and are firmly of the view that this combined role continues to be in the best interests of the Company for the time being and will review the situation on a regular basis. 26 Mountview AR2020.indd 26 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 E C N A N R E V O G INTERNAL AUDIT FUNCTION (SECTION 4 PRINCIPLE M AND PROVISIONS 25 AND 26) At present the size of the business does not warrant a full time internal audit function. As discussed in the Report of the Audit and Risk Committee this is kept under constant review and options for cover are reviewed annually in the light of the size and complexity of the business. CONCERT PARTY Mountview Estates PLC is a family-controlled company. There is a concert party in existence, whose net aggregate shareholdings amount to over 50% of the issued share capital of the Company. Further details are available in Note 21 of the Directors’ Report. THE BOARD LEADERSHIP AND ROLE OF THE BOARD The role of the Board is to provide leadership to the Group, ensuring that the necessary financial and human resources are in place to enable the Group to meet its objectives. In addition, the Board ensures that there are appropriate financial and business systems and controls in place to safeguard shareholders’ interests and maintain an appropriate and effective governance framework. The Board operates in accordance with the Company’s Articles of Association and there is a Schedule of Matters Reserved for Board Decision which includes approval of strategy, budgets, financial reports, public announcements, significant acquisitions of property, major capital expenditure, funding and dividend policy. In addition the Board reviews and approves matters related to the operation of the Board and its Committees, and, where material, any new or significantly amended operational or staff policies. The Code requires that there should be a clear division of responsibilities between the roles of CEO and Chairman, both roles being separate and distinct. The Chairman is responsible for leading the Board and ensuring its effectiveness, including the Board’s decision making process, building a constructive relationship between Executive and Non-Executive Directors, and, for fostering open debate with an appropriate balance of challenge and support. The CEO is responsible for leading the development and execution of long term strategies of the business and has specific responsibilities in relation to all matters to do with property purchase and sale. THE EXECUTIVE DIRECTORS Day-to-day management is delegated to the Executive Directors with focus on major transactions, business growth, strategy, cash management and control. There is regular communication with the NEDs in order to keep them informed about the Group’s operations. This is done via a schedule of regular meetings throughout the year supplemented by ad hoc meetings as needed to address specific matters arising. The Group has seven Senior Managers reporting to the Executive Directors. There are six core departments – Accounts, Property Management, Property Trading, Rent, IT and Administration – with staff reporting either to the Property Managers and/or directly to the Executive Directors. THE NON-EXECUTIVE DIRECTORS The role of the NEDs, as described in their letters of appointment, is to bring independent and objective judgement and scrutiny to all matters before the Board and its committees. During the appointment process steps are taken to confirm that they will have the time needed to meet their responsibilities to the Group. Throughout the year the NEDs hold meetings periodically without the Executive Directors including meetings to discuss remuneration of the Executive Directors and to meet with the external Auditor to discuss the audit of the Annual Report and Accounts. The Code requires (for smaller companies) there to be at least two independent NEDs. Mr A.W. Powell and Ms M.L. Archibald are deemed to be independent NEDs, meeting this requirement. Dr A.R. Williams is a NED but he is not considered to be independent for the purposes of the Code. At present the Board does not intend to appoint any Director to fulfil the role of SID, given the limited size of the Board, but may decide to do so in the future. Mountview AR2020.indd 27 27569 7 July 2020 9:52 am Proof 22 27 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Corporate Governance (Continued) GOVERNANCE FRAMEWORK The Directors recognise their accountability as a Board to the shareholders for the effective stewardship of the Group and its strategy, operations, governance and control. In this the Board are supported by three sub-committees whose roles and current composition are: The Audit and Risk Committee This Committee is responsible for monitoring Mountview’s accounting policies and processes, audit arrangements and for reviewing the risk management framework. It is also responsible for the clarity and completeness of the Company’s disclosure to shareholders. The Committee is comprised of all the NEDs. The Remuneration Committee The Committee is comprised of all NEDs and is responsible for both setting remuneration policy and for the implementation of that policy as regards the Executive Directors. NED remuneration is proposed by the Executive Directors and determined by the Board. The Nomination Committee This Committee is responsible for reviewing the balance of experience, skills and knowledge on the Board, for recommending any appointments to strengthen the Board’s expertise and for managing any re-appointments as needed. All members of the Board are members of the Nomination Committee. Further detail on the Terms of Reference of these Committees can be found on the Company’s website (www.mountviewplc.co.uk). Reports of their activities follow later in this Annual Report and Accounts on pages 31 to 48. Appointment of Directors The Articles of Association contain the following provisions relating to the appointment and replacement of Directors: • The Company may, by ordinary resolution, appoint a person who is willing to act as a Director, either to fill a vacancy or as an addition to the existing Board • The Board has the power to appoint any person who is willing to act as a Director, either to fill a vacancy or as an addition to the existing Board • The total number of Directors (other than any alternate Directors) must not be more than 12 or less than two • In addition to any power to remove a Director conferred by Section 168 of the Companies Act 2006, the Company may, by ordinary resolution, remove any Director before the expiration of his or her period of office, but without prejudice to any claim for damages which he or she may have for breach of any contract of service between him or her and the Company. The Company may then appoint another person, who is willing to act, as a Director in his or her place in accordance with the Articles of Association. The Nomination Committee report on pages 47 and 48 describes the process currently used for identifying and appointing new Directors to the Board. In accordance with the Code, all members of the Board offer themselves for re-election each year as described in the notice for the upcoming 2020 AGM and as set out in the Directors’ Report on page 17 and in the Notice of Meeting on page 90. 28 Mountview AR2020.indd 28 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 THE WORK OF THE BOARD The Board meets formally at least four times a year, with ad hoc meetings to discuss particular transactions and events called as and when required. All Directors are expected to attend all meetings of the Board, and any committees they are members of, and devote sufficient time to the Company’s affairs to fulfil their duties as Directors. The Company Secretary sends out the agenda and supporting information to all members of the Board in advance of Board meetings. Group strategy is proposed by the Executive Directors and that strategy is rigorously discussed, debated and agreed by the Board. The NEDs work with the Executive Directors to deliver on the agreed strategy. The information supplied to the Board and its committees is kept under review to ensure it is fit for purpose, and that it enables sound decision-making. In making decisions throughout the year, the Board is strongly aware of its responsibilities to the Company’s shareholders as well as other stakeholders including managing possible conflicts of interest. Consideration of possible conflicts of interest is a standing item for all Board meetings; any other areas of concern are addressed during regular management or Board meetings. All Directors have access to independent professional advice at the expense of the Group and to the services of the Company Secretary who is responsible to the Board for ensuring the correct procedures are followed. The Directors consider that the small size of the Group and the Board does not warrant a formal performance evaluation process. However, performance of the Directors is evaluated on an ongoing basis by the Board. This is a matter continually under review. E C N A N R E V O G Attendance at and number of Board and committee meetings is set out below: Meetings Full Board Audit and Risk Committee Remuneration Committee Nomination Committee Mr A.W. Powell Mr D.M. Sinclair1 Mrs M.M. Bray1 Ms M.L. Archibald Dr A.R. Williams2 6 6 3 2 6 5 2 2 6 5 2 2 6 6 3 2 5 5 3 2 1. Mr D.M. Sinclair and Mrs M.M. Bray were invited to attend 5 Audit and Risk Committee Meetings and 2 Remuneration Committee Meetings 2. Dr A.R. Williams was unable to attend 1 Board meeting and 1 Audit and Risk Committee meeting. RISK MANAGEMENT AND INTERNAL FINANCIAL CONTROL The Board has overall responsibility for risk management and the Audit and Risk Committee is specifically charged with the governance of the risk management, internal control and audit processes. The Board has carried out a robust assessment of the Principal Risks faced by the Group which are set out on pages 9 to 11 and more detail on the function of the Audit and Risk Committee is set out on pages 31 to 34. Details of the Company’s financial risk management objectives and policies are included in Note 3 to the Consolidated Financial Statements on pages 58 and 59. An ongoing process for identifying, evaluating and managing the significant operational risks faced by the Group was in place throughout the period from 1 April 2019 to the date of approval of the Annual Report and Accounts. The effectiveness of this process is reviewed annually by the Board. The Directors are responsible for establishing and maintaining the Group’s system of internal financial control. Internal control systems in any group are designed to identify, evaluate and manage risks faced by the group and meet the particular needs of the group and the risks to which it is exposed. By their nature such systems can provide reasonable but not absolute protection against material misstatement or loss. As noted on page 27, the Group does not have a dedicated internal audit function. The key procedures which the Directors have established with a view to providing effective internal financial control are as follows: Identification of business risks – The Board is responsible for identifying the major business risks, as well as emerging risks, faced by the Group. The principal risks and uncertainties faced by the Group are set out in the Review of Operations on pages 9 to 11 together with mitigating factors for each risk. Mountview AR2020.indd 29 27569 7 July 2020 9:52 am Proof 22 29 07/07/2020 09:53:13 Mountview Estates P.L.C. Annual Report and Accounts 2020 Corporate Governance (Continued) Management structure – The Board has overall responsibility for the Group and, as described on page 27, there is a formal schedule of matters specifically reserved for decision by the Board. Corporate accounting – Responsibility levels are communicated throughout the Group as part of the corporate accounting procedures. These procedures set out authorisation levels, segregation of duties and other control procedures. Quality and integrity of personnel – The integrity and competence of personnel is ensured through high recruitment standards, the regular day to day contact between the Executive Directors and staff, and close Board supervision. Monitoring – Internal financial control procedures are monitored and reviewed by the Board as a whole. These reviews embrace the provision of regular information to management, and monitoring of performance and key performance indicators. The Board is satisfied that the control procedures are adequate to provide accurate information and safeguard the assets of the Group. EMPLOYEE AND OTHER STAKEHOLDER ENGAGEMENT Discussion of employee engagement is in the Directors’ Report, section 11 on page 21 and a description of our engagement with other stakeholders is presented in our Section 172 Statement on page 12. REMUNERATION This is covered in the Remuneration report set out on pages 35 to 46. By Order of the Board M.M. Bray Company Secretary 9 July 2020 30 Mountview AR2020.indd 30 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Report of the Audit and Risk Committee MEETINGS Committee Member Mr A.W. Powell - Chair Ms M.L. Archibald Dr A.R. Williams1 Non Member Mr D.M. Sinclair2 Mrs M.M. Bray2 Meetings Attended Meetings eligible to Attend 6 6 5 5 5 6 6 6 5 5 E C N A N R E V O G 1. Dr A.R. Williams was unable to attend one meeting. 2. Mr D.M. Sinclair and Mrs M.M. Bray were invited to attend 5 Audit and Risk Committee meetings. Dear Shareholder, I am pleased to present the Audit and Risk Committee Report for the year ended 31 March 2020. The Board considers that I have recent and relevant financial experience as recommended under provision 24 of the Code as it applies to the Company for the financial year under review. In line with the Code, the Audit and Risk Committee (the Committee) as a whole is deemed to have competence relevant to the sector in which the Company operates. The Committee plays a vital role in ensuring that the interests of the shareholders are protected and in assisting the Board in discharging its responsibilities by challenging the integrity of the financial statements, in reviewing the effectiveness of the internal controls systems within the Group and in considering the scope of the annual audit and the extent of the non- audit work undertaken by the external auditor. This report details the activities of the Committee that were undertaken during the year to 31 March 2020. ROLE OF THE AUDIT AND RISK COMMITTEE The Committee’s principal roles and responsibilities, as set out in its terms of reference (which can be found on the Group’s website at www.mountviewplc.co.uk), include: • monitoring the integrity of the Group’s financial statements; • reviewing the tone and content of the Interim Report, the Annual Report and Accounts and any associated regulatory news announcements; • reviewing the Group’s internal financial controls and risk management systems; • assessing the performance and independence of the external Auditor, including the application of our policy on non- audit services • selecting the external Auditor and making appropriate recommendations through the Board to permit shareholder consideration at the Annual General Meeting; • assessing the effectiveness of the external audit process; • acting as a conduit between the Board and the external Auditor; • considering the need for an internal audit function; • reviewing any incidents of whistleblowing occurring within the Group and ensuring adequate review and investigation; and • reporting to the Board on how it has discharged its responsibilities. Mountview AR2020.indd 31 27569 7 July 2020 9:52 am Proof 22 31 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Report of the Audit and Risk Committee (Continued) ACTIVITIES OF THE COMMITTEE During the year the Committee met on six occasions, including meetings prior to the issue of the preliminary and interim results to review audit planning and then audit recommendations, where appropriate, and consider any significant issues arising from the audit and review process. At a meeting in March 2020 the Committee agreed the external audit terms of engagement and the Auditor’s scope, proposed approach and fees for the annual audit for the financial year 1 April 2019 to 31 March 2020. Outside of the formal meeting programme, as Committee chairman I stay in contact with key individuals involved in the Company’s governance, including the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the external audit lead partner and other external advisers. The Committee is satisfied that controls over accuracy and consistency of information presented in the Annual Report and Accounts are robust and has confirmed to the Board that it believes this Annual Report and Accounts are fair, balanced and understandable. The Committee has also been monitoring the impact of Covid-19 on both the Group’s operations and also on the conduct of the audit. Both these aspects are described more fully below. KEY AREAS FORMALLY DISCUSSED AND REVIEWED Principal Responsibilities of the Committee REPORTING AND EXTERNAL AUDIT • Monitoring the integrity of the Company’s financial statements and all formal announcements relating to the Company’s financial performance, reviewing financial reporting judgements contained within them Key areas formally discussed and reviewed by the Committee during the year • Results, commentary and announcements • Key accounting policy judgements, including valuations • Impact of future financial reporting standards • Going concern and long term viability with particular attention to Covid-19 • Making recommendations to the Board regarding approval • External Auditor effectiveness of the external Auditor’s remuneration, terms of engagement, monitoring independence, objectivity and effectiveness VALUATIONS • Monitoring and reviewing the valuation process for the investment properties • Valuer competence and effectiveness • External Auditor management letter, containing observations arising from the annual audit leading to recommendations for financial reporting improvement • External Auditor’s remuneration and audit tender frequency (last tendered in 2017) • Annual report on the effectiveness of the valuer which considers the quality of the valuation process and judgement • Challenge the Executive in respect of both the independent external valuations and Directors’ valuations across the entire property portfolio RISK AND INTERNAL CONTROL • Reviewing the principal risks and uncertainties, including those that could affect solvency or liquidity, future performance and its business model • Maintenance of the Risk Register including identifying and then making a robust assessment of the principal risks facing the Group • Reviewing the risk management disclosures on our approach to • Review of risk disclosures as part of review of accounts risk in the Annual Report and Accounts OTHER • Reviewing the Committee’s Terms of Reference and monitoring its execution • Reviewed and confirmed the Terms of Reference; execution and effectiveness monitored through a progress table and externally sourced questionnaires • Considering compliance with legal requirements, accounting • Reviewed processes for monitoring new relevant regulation, standards and the Listing Rules including discussion with external advisers • Reviewing the whistle-blowing policy and operation and related • Review of whistle-blowing arrangements as set out in staff policies including the anti-bribery and gift policy manual. Confirmation from CFO that there have been none during the year 32 Mountview AR2020.indd 32 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 EXTERNAL AUDIT Audit tenure: – Following best practice and in accordance with its Terms of Reference, the Committee annually reviews the audit requirements of the Company and suitability of the auditor. BSG Valentine (UK) LLP has been the Group’s auditor since 2007 and was re-appointed following a formal tender process in 2017. Current UK regulations require rotation of the lead audit partner every five years, a formal tender of the audit every ten years and a change of auditor every twenty years. Norman Strong, who took over as lead partner for 2019 following the departure of Daniel Burke has retired from BSG Valentine and the 2020 Audit Report will be signed off by Gary Allen who was the Audit Director for the audit in 2019 and thus is familiar with the Group. The Committee wishes to thank Norman for his work in connection with the Mountview audit over the years of BSG Valentine’s tenure as auditor. Objectivity and independence: – These aspects are critical to the integrity of the Group’s audit. Prior to the planning meeting the Committee reviewed the auditor’s own policies and procedures concerning objectivity and independence, including reviewing their Transparency Report found on their website. We also confirmed that the auditor’s evaluation and remuneration processes did not contain incentives for cross-selling. Planning and contact: – Prior to the audit the Committee, together with the Executive Directors, met with the external auditor BSG Valentine to review their proposals for the audit and agreed their terms of engagement, their proposed approach and their fees for the audit. The Committee is confident that appropriate plans were put in place to carry out an effective and high quality audit. BSG Valentine re-confirmed to the Committee during the meeting that they maintained appropriate internal safeguards to ensure their independence and objectivity. E C N A N R E V O G Effectiveness of the external audit process – The Committee appraised BSG Valentine’s performance and independence by assessing their audit plan, the quality and consistency of their team and their reports. The Chairman was in contact with the audit team, during the audit to discuss progress and any issues arising from the audit. In addition, we received feedback from Mountview’s finance team who noted that BSG Valentine were professional and constructive while maintaining their independence and robustness when carrying out their work. At the conclusion of their work the Committee met with the external auditor to discuss their audit findings, including recommendations for financial reporting improvement and their management letter containing observations arising from the annual audit. The discussion also covered the application of materiality and adjusted and unadjusted audit differences. No such differences were identified during the current or prior year’s audit. Re-appointment – Based on their review the Committee believes BSG Valentine remains effective in its role and, BSG Valentine having indicated their willingness to be reappointed as the Group’s external auditor, the Committee has recommended to the Board that they be appointed for another year. A resolution to this effect will be proposed at the AGM. Non-audit services – The Group’s policy requires that all non-audit fee work is reported to the Committee and the Committee can confirm that this policy was adhered to. As in prior years BSG Valentine provided permitted tax compliance services. The Committee consider that these services were in the category of allowed services under the applicable Ethical Standards and has concluded that the auditor’s objectivity and independence were safeguarded. The fees paid to BSG Valentine are shown in Note 6 to the Accounts. INTERNAL AUDIT The need for a dedicated internal audit function was reviewed by the Committee during the year and was not felt to be necessary given the size and relatively simple structure of the Group and its operations, the close day to day involvement of the Executive Directors and the internal control procedures in place. This is kept under regular review. The Committee has the power to commission assurance work from time to time as it sees fit. Mountview AR2020.indd 33 27569 7 July 2020 9:52 am Proof 22 33 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Report of the Audit and Risk Committee (Continued) VIABILITY STATEMENT AND GOING CONCERN The Committee provides advice to the Board on the form and basis underlying both the going concern and the longer-term viability statement. The Covid-19 pandemic clearly could have an impact on both these statements in particular in relation to its impact on the operation of the property market – crucial for the sale of vacant properties. This aspect was kept under regular review in relation to both the current state of the market and expectations by informed commentators of the longevity of the impact of the virus. The Committee are satisfied that while the virus has clearly had an impact on the market that, at the date of signing this report, this has not been at a level or with an effect to seriously damage the validity of either statement. Thus, the Committee concluded that it remains appropriate for the financial statements to be prepared on a going concern basis and recommended the viability statement to the Board. The Company’s going concern statement can be found on page 22. The viability statement can be found on page 18. SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS Significant issues and accounting judgements are identified by the finance team and the external audit process and are considered and reviewed by the Committee. The significant issues considered by the Committee in respect of the year ended 31 March 2020 are set out in the table below: Issues How the issues were addressed The impact of Covid-19 Valuation of investment property portfolio Net realisable value of the trading property portfolio This pandemic affected all areas of Company activity at the end of the financial year and into the new year. The Committee, in conjunction with the other directors, had input into the notes on pages 9 to 11 and page 14 on the impact of the virus on the business. In addition the virus had an impact on the running of the audit – given social distancing requirements and thus the Chairman had more frequent contact with the auditor before and during the audit to discuss and consider the impact on audit quality. The Committee were satisfied that arrangements put in place were appropriate in the circumstances and specifically in light of the evolving guidance from the FRC, FCA, BEIS and others. Finally, as discussed above, the Committee considered the impact of Covid-19 on the going concern and viability statements. The Committee discussed the valuation with the valuers independently of management. This provided the opportunity for the valuers to explain the process they follow to value the portfolio and for the Committee to challenge the key assumptions. On the basis of this discussion the Committee concluded that the valuations were independent and an appropriate basis for the year-end financial accounts, including Allsop’s caveat concerning the uncertainty arising due to Covid-19 as described in note 13 to the accounts. The Committee’s consideration of this aspect focused on the more recent purchases which have the greatest risk and included reviewing the processes used by the property team to assess values and hence consider the need for a provision. On the basis of these discussions the Committee was satisfied that the valuation was in line with the accounting policy for trading properties, thus there was no need for any provision. The Committee also considered a number of other judgements made by management, none of which were material in the context of the Group’s results or net assets. KEY ISSUES FOR 2020/21 The Committee is always looking at ways to strengthen its support around governance to ensure that the Company’s communications and processes are in line with good practice in this area. For 2020/21 this will continue to include monitoring evolving best practice under the Code and other regulations. In addition we will continue to monitor the key areas of judgement that are recurring matters and specifically the Company’s response to the evolving Covid-19 pandemic. A.W. Powell Chairman of the Audit and Risk Committee 9 July 2020 34 Mountview AR2020.indd 34 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report MEETINGS Committee Member Ms M.L. Archibald – Chair Mr A.W. Powell Dr A.R. Williams Non Member Mr D.M. Sinclair1 Mrs M.M. Bray1 Meetings Attended Meetings eligible to Attend 3 3 3 2 2 3 3 3 2 2 E C N A N R E V O G 1. Mr D.M. Sinclair and Mrs M.M. Bray were invited to attend part of 2 Remuneration Committee meetings and were not present for discussion concerning the process of determining their awards or the amount of those awards. Dear Shareholder, On behalf of the Remuneration Committee and the Board, I am pleased to introduce our 2020 Remuneration Report for which we are seeking your support at our AGM on 12 August 2020. As described more fully below, the report this year also incorporates a proposed updated Remuneration Policy that, if approved, will apply for the three years commencing 2020/21. ROLE OF THE REMUNERATION COMMITTEE The goal of the Remuneration Committee is to independently formulate and apply remuneration bases that align the interests of our Executive Directors with those of our shareholders, and are fair and transparent in execution. The role of the Remuneration Committee is set out in our terms of reference which can be found on the Company’s website at www.mountviewplc.co.uk. The Committee have reviewed these terms of reference and confirmed that they remain appropriate. ACTIVITIES OF THE COMMITTEE The main work of the Remuneration Committee in the current year has been the review and update of the Remuneration Policy and the determination of the Executive Directors’ awards. REVIEW OF THE REMUNERATION POLICY: The current Remuneration Policy is due to expire during 2020 and accordingly we have carried out a review of the policy and will be asking shareholders to approve the new policy at the AGM on 12 August 2020. Our review was carried out in conjunction with FIT Remuneration Consultants LLP (FIT) and is described in more detail in the main body of the report. FIT, who were appointed by the Remuneration Committee, provide no other services to the Group. During the initial discussions prior to engaging FIT, the Remuneration Committee satisfied itself that FIT demonstrated the necessary depth of knowledge for the agreed role and objectivity in providing answers to questions posed during that discussion. FIT’s role was to help design the process to be followed and to provide expert input and comment on the areas that needed consideration in the policy and the wider Remuneration Report as a whole given the changing regulatory framework discussed below. They also reviewed the final draft of the Remuneration Report prior to publication. The total fees paid to FIT for their assistance were £5,700 As a result of the Remuneration Committee’s review of the current policy we have a number of changes that we describe below, and would like to draw attention to two points. First, that we have lowered the maximum amount for the short-term incentives from 250% of base salary to 150%. Secondly, we have brought the pension contribution levels that could be made for future directors (the current Executive Directors do not receive pension contributions) in line with the amount payable to the workforce as a whole, though they can receive additional contributions through salary sacrifice. Mountview AR2020.indd 35 27569 7 July 2020 9:52 am Proof 22 35 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) EXECUTIVE DIRECTORS’ AWARDS: The Committee’s other main work for the year concerned the remuneration of the Executive Directors applying the existing policy which was clarified and approved by shareholders at the General Meeting held in November 2018 and has been in effect from the date of its approval at the 2017 Annual General Meeting. In considering the awards we were mindful of the impact that Covid-19 has had on the wider UK economy. For example, in the current year many of the companies in the peer group in the past two years were in real estate sub-sectors that are being severely impacted by Covid-19, reducing their comparability. In addition, as a result of transactions others previously in the peer group are no longer separately quoted. Thus, while the Remuneration Committee did take note of data from this group, we placed less weight on it than in prior years applying our own discretion when reaching decisions. We were also cognizant that the pandemic was declared very close to the Company’s year-end, and thus had very little impact on the financial results of the year under review. We have also seen, as noted elsewhere in this report, that through the early months of the pandemic the Group has been able to continue to perform at a similar level to previous years. Taking these factors into account, the Remuneration Committee did not believe that measures taken by others whose financial results have been affected by the pandemic, including deferral of bonuses or salary, were appropriate. In approaching the review of the bonus figures for the year, subject to the comment on peer group data, the Remuneration Committee has adopted the approach used in prior years of taking account of financial metrics of the Group (primarily profit before tax), non-financial factors and peer group and market benchmarks. Applying these principles to the year under review year the bonus awards for the CEO and CFO were set at £447K and £308K respectively. The Remuneration Committee has agreed to an increase in Executive Director salaries of 3.00% (effective 1 April 2020), in line with the inflation increase for the Company’s general staff. REGULATORY CHANGES In carrying out their work during the year the Remuneration Committee’s members have had regard to the changing regulatory environment around remuneration notably in the 2018 Code and legislation aimed at greater transparency and disclosure of remuneration practices. Many of these requirements relate to Long Term Incentive Plan (LTI) or executive pension arrangements which do not apply to the Group. Other provisions emphasised matters that were already aspects of our policy and practice, for example, the application of discretion or information disclosed where we have sought to align with the new requirements. I would like to thank all those shareholders, advisers and others who have taken part in the consultation and review process that prompted the changes noted above and which we hope you will support in the resolutions being put to members. We are grateful to our Executive Directors and their continuing efforts to deliver the best results to shareholders in line with our strategy in markets that remain difficult and are changing in light of the Covid-19 pandemic and economic fallout. I am also thankful for the valuable contributions of my fellow Committee members throughout the year. M.L. Archibald Chairman, Remuneration Committee 9 July 2020 36 Mountview AR2020.indd 36 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 E C N A N R E V O G THE NEW REMUNERATION POLICY OBJECTIVES OF THE REVIEW: As described elsewhere in this report, the strategy and business model of the Group are reviewed regularly with shareholders and they continue to support both. With this in mind and also taking account of the evolution of governance and regulation, the Remuneration Committee’s key objectives for the current Remuneration Policy review were to ensure that: • incentives remain aligned with the strategy; • packages are competitive against our peer group; • our Remuneration Policies are suitable to attract, motivate and retain the right talent; and • our Remuneration Policies and practices are in line with evolving good practice including matters arising from the UK Corporate Governance Code (Code) published in 2018. In the conduct of the review process and the updated policy we have sought to reflect the characteristics outlined in provision 40 of the Code as follows: Clarity – we sought to engage with major shareholders during the review. The new policy with reasons for changes adopted and suggestions not taken up have been discussed with our shareholders and directors. Simplicity – as discussed further below, we have retained the simplicity of the current policy avoiding artificial or immaterial metrics. Risk – we have been mindful of the risk environment of the Group and aimed to ensure that the policy reflected but did not add to that environment as could be the case with, for example, misaligned metrics that could encourage inappropriate risk taking. Predictability – the Short-Term Incentive (STI) arrangements lead to a predictable range of outcomes, and are the subject of a cap. Proportionality – the policy is designed to lead to awards that blend the objectivity of financial metrics and subjectivity involved in assessing non-financial performance. Alignment to culture – the principles of rewarding individual performance and thus contribution to Group results are reflected in remuneration structures throughout the Group. OVERVIEW OF THE REVIEW: The process we followed began with a consultation with the major shareholders to seek views on the current policy, then review and update of the policy in conjunction with FIT, discussion of the proposed changes with the Executive Directors, a further round of consultation with the major shareholders and then finalisation of the policy that is presented in this Remuneration Report. While employees were not specifically consulted as a part of the review, the Remuneration Committee did take into account the general pay and conditions that apply to the staff which are determined by the Executive Directors with whom they work closely on a day to day basis. Following from this process, as a part of the review the Remuneration Committee considered metrics that might be appropriate for the short-term incentive. As noted elsewhere in this annual report, the Group’s drivers of their main source of revenues and profit arising in the current year – sales on vacant possession – are beyond the control of the Group or the Executive Directors. This is because these are in turn driven by factors that are outside the Group’s control: the timing of vacant possession, the location and thus market price of properties disposed of, the original purchase date of the properties sold and the appetite for the properties that are sold. It is also the case that at a transaction level, the net proceeds are a function of the historic and current astuteness, judgement and experience brought to bear when purchasing properties, setting of reserve prices and the pricing of those sales being made by private treaty – all of which are ongoing activities firmly in the remit of the Executive Directors and their teams. The Remuneration Committee considered that, while firmly of the view that there should be a clear link between the Group’s financial results and the short term element of the remuneration of the Executive Directors, metrics that attempted to link Executive performance with the current year’s profits would be unreliable and, at best, be artificial and, at worst, be misleading and thus the Remuneration Committee concluded that the current approach continued to be appropriate. Mountview AR2020.indd 37 27569 7 July 2020 9:52 am Proof 22 37 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) The Remuneration Committee takes these factors concerning historical and current performance into account when applying its judgement and discretion in the process for determining the short-term incentive payments as they are relevant to the profits generated in any one year. PROPOSED POLICY CHANGES: As a result of the consultation and analysis carried out, the Remuneration Committee is proposing a number of policy changes. Those relating to the components of Executive and Non-Executive Directors’ remuneration are noted in the tables below. Other changes made are to insert the provision of a time limit, set on a case by case basis, for paying relocation costs, and clarification of the termination payments for NEDs. In addition, where needed, minor editorial changes have been made without altering the substance of the previous policy. KEY PRINCIPLES OF REMUNERATION POLICY The Company’s Remuneration Policy is designed to attract, motivate and retain the right talent for our business in order that it can continue to deliver excellent returns for shareholders. As described above, the Remuneration Committee believes that there should be a clear link between the Group’s financial results and the short-term incentive element of the remuneration of Executive Directors. In order to achieve this, the Remuneration Policy provides for the Executive Directors’ total remuneration to comprise the following elements: base salary, a short-term incentive award, pension and benefits. All elements that are considered annually by the Remuneration Committee notably in our review of base salary and the Short-Term Incentive award. Base salary is reviewed against seniority, inflationary increases, personal performance, changes in responsibilities and the peer group; whereas the short- term incentive award is reviewed and aligned to: 1. the Group’s financial metrics (primarily profit before tax) 2. a Director’s personal contribution; and 3. non-financial corporate goals to build for long term sustainable success, including management development, succession planning and the maintenance of a robust business infrastructure. At the same time the Remuneration Committee takes account of the pay and conditions for our staff and reviews market comparators to ensure that reward is appropriate. The Remuneration Committee considers the relative performance of the Group’s results in relation to its peers in determining where appropriate benchmarks should be set (i.e. upper quartile, median or lower quartile). Given that the Executive Directors (particularly the CEO) have significant holdings of the Company’s shares, the Remuneration Committee does not consider that a long-term incentive share scheme (LTI) or other similar share schemes are appropriate. Similarly, the Committee consider that in view of both these factors and the experience and long service of the Executive Directors, malus and clawback provisions are not appropriate at this time. Both the role of an LTI and clawback provisions will be reviewed if other Executive appointments are made in the future. The Executive Directors do not receive a pension, but the Remuneration Policy still provides for a pension contribution in the event that new appointments are made in the future. Pension contributions are made on behalf of other employees working at the Company. REMUNERATION POLICY Set out below is the Remuneration Policy proposed to take effect from 12 August 2020 subject to shareholder approval at the AGM to be held on that day. The Remuneration Policy has been developed in consultation with major shareholders as described above and aims to ensure that the remuneration of the Executive Directors reflects their contribution to the performance of the Group. The tables below summarise the main elements of the remuneration packages of the Executive Directors, the key features of each element, their purpose and linkage to our strategy. The table also notes the changes from the current policy that have been used in setting the Executive Directors’ 2019/20 Short-Term Incentive awards and their base salaries for 2020/21. 38 Mountview AR2020.indd 38 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 EXECUTIVE DIRECTORS Component BASE SALARY* Proposed new policy Purpose and link to strategy Operation To provide a competitive level of non-variable remuneration aligned to the Company’s peer group and reflective of the seniority of the post, the experience of the Executive and the known and expected contribution to the Group’s strategy. Base salaries are reviewed each year with regard to the seniority of the individual, changes to responsibilities, performance, peer group developments and inflationary increases taking into account the Consumer Prices Index, published annual remuneration surveys and the average change in workforce salaries, excluding promotion, merit or similar components of workforce rises, if this is lower than the published inflation indices. Base salaries are fixed for each financial year and effective from 1 April each year. Opportunity Performance metrics None PENSION* Purpose and link to strategy Operation Opportunity Performance metrics None BENEFITS* To attract and retain high quality Executives by providing income in retirement. Unchanged The Company would offer contributions to an approved defined contribution pension scheme. Contributions would be made at the rate applied to workforce pensions and be based on base salary only. Contributions may be made at a higher rate through salary sacrifice. Changes from old policy Unchanged Clarifies the role of published surveys and the inflation component of workforce salary increases. Unchanged Unchanged Unchanged Contributions aligned with the wider workforce, though salary sacrifice is possible. Unchanged E C N A N R E V O G Purpose and link to strategy Operation Opportunity To aid the recruitment and retention of high quality Executives. Unchanged The Company provides private medical insurance, sick pay and life assurance. Other non-pension benefits may be provided if the Remuneration Committee considers it appropriate. The benefits are fixed in relation to the Executive’s base salary. The Remuneration Committee reviews the appropriateness of these benefits. The value of benefits may vary from year to year depending on the cost to the Company from third-party providers. Clarifies that pension benefits are governed by policy above. Unchanged Performance metrics None SHORT TERM INCENTIVE* Purpose and link to strategy Operation Opportunity Performance metrics Incentive award to be aligned with Group financial performance and reward personal contribution to results. Awards are reviewed each year with regard to the individual’s performance and their contribution to the Group’s performance, financial results and peer group comparators. Any award under this scheme will be set at a level that aligns the short-term incentive award with the Group’s financial performance, while also reflecting non-financial contributions and remaining comparable with our peer group. The maximum percentage of base salary payable for an award under this scheme is 150%. The Remuneration Committee considers financial metrics (currently primarily profit before tax), other non-financial achievements and corresponding movements within the peer group over the course of the financial year under review. * As noted above, the Committee concluded that clawback provisions were not appropriate at this time. Unchanged Unchanged Unchanged Maximum reduced from 250% to 150% Unchanged Mountview AR2020.indd 39 27569 7 July 2020 9:52 am Proof 22 39 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) NON-EXECUTIVE DIRECTORS The policy on Non-Executive Directors’ fees is set out below: Component Proposed new policy Changes from old policy FEES Purpose and link to strategy Operation Opportunity Non-Executive Directors receive a fee to cover their time and expenses in attending Board, Committee and any other meetings that they are required to attend over the year. Non-Executive Directors may receive additional fees and expenses for attending meetings not otherwise in the ordinary course of their duties, or where additional effort is needed above that required by the terms of their appointment. Fees are reviewed periodically by the Board with reference to the expected time commitment and market level for such services. Non-Executive Directors are not entitled to any other incentives or benefits beyond their fees and reimbursement for travel and related business expenses reasonably incurred in performing their duties. The aggregate fees and any benefits of the Chairman and Non-Executive Directors will not exceed the limit from time to time prescribed within the Company’s Articles of Association for such fees, currently £250,000 p.a. in aggregate. Any increases in fee levels made will be appropriately disclosed in the Annual Report. Unchanged Moves note on amounts receivable by NEDs to ‘Operation’ from ‘Opportunity’. Otherwise unchanged. Confirms the cap on aggregate NED fee levels. Performance metrics None Unchanged APPROACH TO RECRUITMENT REMUNERATION When setting the remuneration package for a new Executive Director, the Remuneration Committee will apply the same principles and policy as set out above. Depending on individual circumstances, the Remuneration Committee will consider providing pension contributions and other long-term incentives appropriate to the individual and their responsibilities. Base salary will be set at a level appropriate to the role and experience of the Executive Director being appointed. This may include agreement on future increases up to a market rate, in line with increasing experience and responsibilities, subject to good performance, where it is considered appropriate by the Remuneration Committee. In relation to external appointments, the Remuneration Committee may structure a remuneration package that it considers appropriate to recognise awards or benefits that may or will be forfeited on resignation from a previous position, taking into account timing and valuation – and any other matters it considers relevant. The policy is that the maximum payment under any such arrangement (which may be in addition to the normal variable remuneration) should be no more than the Remuneration Committee considers is required to provide reasonable compensation to the incoming Executive Director. In the case of an employee who is promoted to the position of Executive Director, it is the Company’s policy to honour pre- existing award commitments (including awards, incentives, benefits and contractual arrangements) in accordance with their terms to the extent that such pre-existing commitments are permitted by the Code. Where any recruitment involves the agreed relocation of the individual, the Company may offer additional benefits and meet some or all associated costs for periods that would be agreed by the Remuneration Committee on a case by case basis. Where an individual is appointed as a result of an acquisition, merger or other corporate event, the Company will honour any legacy terms and conditions to the extent that such legacy terms are permitted by the Code. Non-Executive Directors appointments will be made based on a Non-Executive Director agreement. Non-Executive Directors’ fees, including those of the Chairman, will be set at a competitive market level, reflecting the experience of the individual and the responsibility and time commitment of the role. In all cases the Remuneration Committee will bear in mind the best interests of the Company. 40 Mountview AR2020.indd 40 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 DETAILS OF DIRECTORS’ SERVICE CONTRACTS EXECUTIVE DIRECTORS Mr D.M. Sinclair Mrs M.M. Bray Contract Date 8 August 2002 1 April 2004 Unexpired Term Notice Period No fixed term No fixed term 12 months 12 months The Executive Directors’ service contracts contain provisions relating to matters such as salary, salary continuance in the event of illness, holidays, life and medical insurance, etc. The Executive Directors’ service contracts can be terminated on 12 months’ notice by either party. The Executive Directors are entitled to a compensation payment upon a change of control of the Company. Such compensation payment (subject to the deduction of income and other taxes required by law and any other sums owed by the Executive Director to the Company) is equal to the Executive Director’s annual gross remuneration as reported in the Company’s last audited accounts. The Executive Directors’ contracts make no other provision for termination payments other than for salary and benefits in lieu of notice. Executive Directors are entitled to reasonable out of pocket expenses when on Company business. NON-EXECUTIVE DIRECTORS Ms M.L. Archibald Dr A.R. Williams Mr A.W. Powell Contract Date 1 July 2020 1 December 2018 1 April 2018 Unexpired Term Notice Period 36 months 17 months 9 months None None None Non-Executive Directors are only entitled to accrued fees due to them at the date of termination of their appointment and, where appropriate, a payment in lieu of their contractual notice period. OTHER MATTERS The Remuneration Committee may make non-substantial amendments to the policy set out above. In making its decisions, the Remuneration Committee shall take into account the conditions of the Group as a whole and proposals as regards the general staff. Lastly, the Remuneration Committee considers the views of investor bodies and shareholders. The Company seeks an ongoing dialogue with shareholders on all matters of strategic importance – including remuneration. POLICY REGARDING EXTERNAL APPOINTMENTS Executive Directors are not actively encouraged to hold external directorships. Duncan Sinclair is a director of Sinclair Estates Ltd. and Ossian Investors Ltd, companies which hold property assets in run-off. He is also a Trustee of The Sinclair Charity and a Director of Sinclair Events Ltd. Non-Executive Directors are appointed because of their skills and experience and it is accepted that they have other commitments beyond Mountview. The Chairman keeps the availability of Non-Executive Directors under review to ensure that they have the capacity to support the Company as required. E C N A N R E V O G Mountview AR2020.indd 41 27569 7 July 2020 9:52 am Proof 22 41 07/07/2020 09:53:14 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) ILLUSTRATION OF POSSIBLE OUTCOME IN CEO AND CFO REMUNERATION £000S Base Salary Fixed Benefits Variable On target* Minimum** Maximum*** CEO CFO CEO CFO CEO CFO 573 (54.1%) 435 (57.8%) 573 (95.8%) 435 (100.0%) 573 (39.3%) 435 (40%) 25 (2.4%) 318 (42.2%) 25 (4.2%) 25 (1.7%) 461 (43.5%) 860 (59%) 653 (60%) Total 1059 753 598 435 1458 1088 * As noted earlier in the remuneration report, formal targets are not used in determining the short-term incentive awards, with the award being based on year on year relative financial and non-financial performance and the Executive Director’s personal contribution which includes a mix of objective and subjective measures. For the purposes of the ‘At expectation’ illustration we have assumed that the Short Term Incentive award would represent the same proportion of the base salary as in 2019/20. ** Minimum is based on fixed remuneration consisting of projected annual salary for 20/21 with fixed benefits but assuming no Short-Term Incentive award. *** Maximum is based on fixed remuneration consisting of projected annual salary for 20/21 with fixed benefits with the maximum Short-Term Incentive award opportunity of 150% of base salary. APPLICATION OF THE REMUNERATION POLICY The Remuneration Committee starts its process by reviewing the market benchmarks for remuneration amongst the Group’s peer group, with particular focus on any movements in salaries for the current year and recent Group performance. The Remuneration Committee would then determine the appropriate level of base salary for the Executive directors with reference to these results, as well as considering relative performance against the peer group. The Remuneration Committee sets the Executive Directors’ Short-Term Incentive award at a level to reflect the Group’s financial performance while remaining comparable with our peer group. The award is referenced to the financial metrics of the Group (primarily profit before tax) and also takes account of such other factors as the Remuneration Committee sees fit such as: • Any other non-financial factors to be considered; • The total remuneration of other peer group companies and movement in market benchmarks. 42 Mountview AR2020.indd 42 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 IMPLEMENTATION REPORT AUDITED INFORMATION DIRECTORS’ TOTAL REMUNERATION SINGLE FIGURE TABLE 2020 Executive D.M. Sinclair M.M. Bray Non-Executive A.W. Powell1 M.L. Archibald Dr A.R. Williams Salary £000 Benefits in kind2 £000 Total Fixed Remuneration3 £000 Bonus4 £000 555 421 99 39 39 1,153 25 - - - - 25 580 421 99 39 39 1178 447 308 – – – 755 Total £000 1,027 729 99 39 39 1,933 1 Commensurate with his role as Chairman Tony Powell’s salary was increased to £99k p.a. from 1 April 2019. 2 The Benefits in kind are as set out in the policy table. ³ The current Executive directors do not receive a pension contribution thus the Total Fixed remuneration comprises salary and benefits. 4 The approach used for the bonus awards is described in the ‘Activities of the Committee’ note on page 35. The Company does not operate a LTI scheme, and thus the bonus figures are the Total Variable Remuneration. E C N A N R E V O G 2019 Executive D.M. Sinclair M.M. Bray Non-Executive A.C.J. Solway1 A.W. Powell M.L. Archibald2 Dr A.R. Williams2 Salary £000 Benefits in kind3 £000 Total Fixed4 Remuneration £000 Bonus5 £000 530 402 124 46 39 39 1,180 24 – – – – – 24 554 402 124 46 39 39 1,204 421 290 – – – – 711 Total £000 975 692 124 46 39 39 1,915 1 A.C.J. Solway’s salary was increased to £99k p.a. from 1 April 2018. His remuneration above includes payment until the cessation of his contract at 30 June 2019. The Benefits in kind are as set out in the policy table. 2 M.L. Archibald and Dr A.R. Williams salaries were increased to £39k p.a. from 1 April 2018. 3 4 5 The current Executive directors do not receive a pension contribution thus the Total Fixed remuneration comprises salary and benefits. The approach used for the bonus awards is described in the ‘Activities of the Committee’ note on page 35. The Company does not operate a LTI scheme, and thus the bonus figures are the Total Variable Remuneration. Mountview AR2020.indd 43 27569 7 July 2020 9:52 am Proof 22 43 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) UNAUDITED INFORMATION CEO SINGLE FIGURE 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair D.M. Sinclair Bonus as % of maximum bonus * CEO single figure of total remuneration £000 32.20% 31.77% 34.02% 41.20% 52.91% 33.33% 32.00% 32.00% 23.27% 33.60% 1,027 975 977 1,038 943 778 659 662 520 523 * Prior to 2017 the Remuneration Policy did not have a maximum for STI – so the bonus as a percentage of maximum is not formally computable. However, for the purposes of comparison we have computed these percentages for earlier years as if the post 2017 policy applied. In addition, as noted on page 38 the Company does not operate a LTI scheme. PERCENTAGE CHANGE IN REMUNERATION OF CEO AND EMPLOYEES The percentage change in remuneration between 2019 and 2020 for the CEO and for all employees, excluding the Directors, in the Group was: CEO Employee population (excluding the Directors) CFO SINGLE FIGURE 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray M.M. Bray 5.33% 5.33% Bonus as % of maximum bonus * CFO single figure of total remuneration £000 29.25% 28.86% 30.97% 37.87% 48.42% 31.70% 28.80% 28.80% 20.43% 27.91% 729 692 692 730 661 546 473 473 373 383 * Prior to 2017 the remuneration policy did not have a maximum for STI – so the bonus as a percentage of maximum is not formally computable. However, for the purposes of comparison we have computed these percentages for earlier years as if the post 2017 policy applied. In addition, as noted on page 38 the Company does not operate a LTI scheme. PERCENTAGE CHANGE IN REMUNERATION OF CFO AND EMPLOYEES The percentage change in remuneration between 2019 and 2020 for the CFO and for all employees, excluding the Directors, in the Group was: CFO Employee population (excluding the directors) 5.35% 5.33% 44 Mountview AR2020.indd 44 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 E C N A N R E V O G PERFORMANCE GRAPH The graph illustrates the Company’s performance compared to a broad equity market index over the past ten years. As the Company is a constituent of the FTSE 350 Real Estate Index, that index is considered the most appropriate form of broad equity market index against which the Company’s performance should be plotted. Performance is measured by Total Shareholder Return as represented by share price performance and dividend. The graph looks at the value of £100 invested in Mountview Estates P.L.C. compared to the value of £100 invested in the FTSE All-Share Index and the FTSE 350 Real Estate Index on 31 March each year. 10 YEAR TSR RETURN – ANNUAL CHART 350 300 250 200 150 100 50 0 31/03/2010 31/03/2011 31/03/2012 31/03/2013 31/03/2014 31/03/2015 31/03/2016 31/03/2017 31/03/2018 31/03/2019 31/03/2020 Mountview Estates – Total Return Index FTSE 350 SS Real Estate £ – Total Return Index FTSE All Share Index – Total Return Index RELATIVE IMPORTANCE OF SPEND ON PAY The difference in actual expenditure between 2019/20 and 2018/19 on remuneration for all employees in comparison to profit after tax and distributions to shareholders by way of dividend is set out in the tabular graphs below: PROFIT AFTER TAX (£M) 0.29M 28.30 28.01 DIVIDEND (£M) 15.59 15.59 TOTAL EMPLOYEE PAY 0.16M 4.09 3.93 2020 2019 2020 2019 2020 2019 Mountview AR2020.indd 45 27569 7 July 2020 9:52 am Proof 22 45 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Remuneration Report (Continued) STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN THE CURRENT FINANCIAL YEAR With effect from 1 April 2020 the basic salary of CEO will be increased to £573k p.a. and the CFO to £435k p.a. DETAILS OF THE REMUNERATION COMMITTEE During 2019/2020 the Remuneration Committee comprised three Non-Executive Directors, two of whom were independent. Details of the Non-Executive Directors who were members of the Remuneration Committee during the year are disclosed on page 35. STATEMENT OF VOTING AT GENERAL MEETING At the Annual General Meeting held on 7 August 2019 the Non-Executive directors’ Remuneration Report received the following votes based on proxy forms from shareholders. Resolution Annual report on Remuneration (2019 AGM) Remuneration Policy (2017 AGM) Number of shares Voting for % Number of shares Voting against % Total votes cast Votes withheld 1,997,786 1,700,309 67.96% 67.25% 942,065 828,077 32.04% 32.75% 2,939,851 2,528,386 0 0 As reported through the RNS service on February 10, 2020: Following the 2019 AGM in August and prior to the general meeting held on 18 November 2019, the Company identified as far as possible those shareholders who did not support the various resolutions and attempted to engage with them to seek their views. They declined to meet or engage. The Company remains committed to shareholder engagement and will continue to offer to meet with shareholders to take into account their concerns and considerations in the future. DIRECTORS’ INTERESTS IN SHARE CAPITAL* The number of Ordinary Shares in the Company in which the Directors and their families were interested is as follows: Ordinary Shares of 5p each D.M. Sinclair including: • beneficial holding of Sinclair Estates Limited of 54,165. (Mr Sinclair is a Director of Sinclair Estates Limited.) • non-beneficial holding of The Sinclair Charity of 58,117 (Mr Sinclair is a trustee of The Sinclair Charity.) M.M. Bray A.C.J Solway** Dr A.R. Williams 31 March 2020 31 March 2019 596,500 12,302 – 62,072 595,700 12,302 500 52,916 * As noted on page 38 the Company does not operate any LTI or similar share schemes. ** A.C.J. Solway resigned as at 31 March 2019. All the above interests are beneficial unless otherwise stated. There were no other changes in shareholdings during the year. Ms. M.L. Archibald Chairman of the Remuneration Committee 9 July 2020 46 Mountview AR2020.indd 46 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Report of the Nomination Committee MEETINGS Committee Member Mr D.M. Sinclair – Chair Mrs M.M. Bray Ms M.L. Archibald Mr A.W. Powell Dr A.R. Williams Meetings Attended Meetings eligible to Attend 2 2 2 2 2 2 2 2 2 2 E C N A N R E V O G All the Directors of the Company are members of the Nomination Committee. Dear Shareholder, I am pleased to present the Nomination Committee report which sets out its role and activities during the year. HOW THE NOMINATION COMMITTEE OPERATES The Board considers that given its size, it would be unnecessarily burdensome to establish a separate Nomination Committee that did not include the entire Board and believes that this enables all Directors to be kept fully informed of any issues that arise. The Nomination Committee met twice during the year ended 31 March 2020, supplemented by informal meetings and discussions. Only the members of the Nomination Committee have the right to attend meetings, but we may invite other executives or advisers to attend all or part of any meeting as appropriate. As previously reported, Mr A.W. Powell took on the role of Acting Non-Executive Chairman with effect from 31 March 2019, and following the 19 November 2019 meeting of the Nomination Committee was appointed as Non-Executive Chairman with immediate effect. This ensured that continuity was provided with a minimum of disruption to the Board and the business. ROLE OF THE NOMINATION COMMITTEE The main roles and responsibilities of the Committee are set out in its terms of reference, which are reviewed annually and are available on the Group’s website. These responsibilities include assisting the Board in discharging its responsibilities relating to the composition and make-up of the Board and its Committees, succession planning, the endorsement of Directors for re-election at the AGM and, when needed, the appointment of additional Directors. The Board believes in the benefit of having a broad range of skills and backgrounds and the need to have a balance of experience, independence, diversity - including gender, and knowledge of the Group and its Board of Directors. These matters are taken into account during recruitment but ultimately we look to appoint the best candidate for the role on the basis of their merit and ability taking into account the needs of the Group, including the skills needed to support delivery of the Group’s strategic objectives and to ensure the effective functioning of the Board now and in the future. Mountview AR2020.indd 47 27569 7 July 2020 9:52 am Proof 22 47 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Report of the Nomination Committee (Continued) PROCESS FOR BOARD APPOINTMENTS No new appointments to the Board were made during 2019/20. The Nomination Committee has a formal appointment process in place that embraces these principles and would be used should the need for a new appointment be identified. The key steps in the process are: • The Nomination Committee considers the skills and experience that it believes are needed for the Group to function effectively, taking account of the skills of the existing Board members and those of external advisers that the Board needs to draw on from time to time. • Where a particular skill set is believed to be in continuous demand then the Nomination Committee will evaluate the balance of the skills currently on the Board in order to identify a specification of the personal attributes, skills and capabilities and experience needed, including, but not limited to, the skill set that prompted this evaluation. • Should it be appropriate to filling the vacancy to look for an external candidate, then an independent external search consultant will be appointed, the needs of the appointment and the recruitment process discussed and agreed. • The process, including interviews and evaluation will be followed in conjunction with the external consultant. • The conclusion of the process would be a recommendation to the Board. DIVERSITY As at 31 March 2020, the Group had one female Executive Director, Mrs Marie Bray, who has been on the Board since 2004, and one female Non-Executive Director, Ms Mhairi Archibald, who has been on the Board since July 2014. Female Board membership represented 40% of the Board. The Group has 7 Senior Managers (who are not Directors), 3 of whom are female. Of our 29 total employees, 11 are male and 18 are female. ACTIVITIES OF THE COMMITTEE The Nomination Committee, and related Board discussions, covered the following matters: • • • • • the composition of the Board and the Board’s committees the balance of skills, experience and knowledge required by the Board and its committees and the business as a whole the internal appointment of Mr A W Powell as Non-Executive Chairman the re-election of all the Directors at the AGM in 2020, taking into account their contribution and time commitments the review of the Group’s approach to and provisions for succession planning, developing staff, diversity and gender balance and Board evaluation. These matters are discussed in the Directors’ Report and the Corporate Governance Report. As a result of their work, the Nomination Committee is satisfied that the Board has the necessary experience to lead the Group and deliver on its strategy. BOARD AND COMMITTEE EVALUATION The Directors consider that the small size of the Group and Board does not warrant a formal performance evaluation process. However, performance of the Directors is evaluated on an ongoing basis by the Board. This is a matter continually under review. D.M. Sinclair Chairman of the Nomination Committee 9 July 2020 48 Mountview AR2020.indd 48 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Consolidated Statement of Comprehensive Income for the year ended 31 March 2020 Revenue Cost of sales Gross profit Administrative expenses Gain on sale of investment properties Operating profit before changes in fair value of investment properties (Decrease)/Increase in fair value of investment properties Profit from operations Net finance costs Profit before taxation Taxation – current Taxation – deferred Taxation Profit attributable to equity shareholders and total comprehensive income Basic and diluted earnings per share (pence) All the activities of the Group are classed as continuing. Year ended 31 March 2020 £000 64,873 (23,519) 41,354 (5,630) 1,174 36,898 (969) 35,929 (988) 34,941 (7,320) 675 (6,645) 28,296 725.7p Year ended 31 March 2019 £000 65,428 (24,627) 40,801 (5,442) – 35,359 287 35,646 (1,079) 34,567 (6,504) (55) (6,559) 28,008 718.3p Notes 4 4 13 13 8 9 19 9 11 The Notes on pages 53 to 69 are an integral part of these consolidated financial statements. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 49 27569 7 July 2020 9:52 am Proof 22 49 07/07/2020 09:53:15 Mountview Estates P.L.C. Annual Report and Accounts 2020 Consolidated Statement of Financial Position for the year ended 31 March 2020 Assets Non-current assets Property, plant and equipment Investment properties Current assets Inventories of trading properties Trade and other receivables Cash at bank Total assets Equity and liabilities Capital and reserves attributable to equity holders of the Company Share capital Capital reserve Capital redemption reserve Other reserves Retained earnings Non-current liabilities Long-term borrowings Deferred tax Current liabilities Bank overdrafts and short-term loans Trade and other payables Current tax payable Total liabilities Total equity and liabilities Approved by the Board on 9 July 2020. D.M. Sinclair Chief Executive M.M. Bray Director As at 31 March 2020 £000 As at 31 March 2019 £000 Notes 12 13 15 16 18 21 22 22 22 23 18 19 18 17 1,670 24,122 25,792 392,069 3,676 3,553 399,298 425,090 195 25 55 56 379,243 379,574 31,100 4,076 35,176 2,060 4,830 3,450 10,340 45,516 425,090 1,710 28,112 29,822 392,384 1,915 1,981 396,280 426,102 195 25 55 56 366,543 366,874 47,250 4,751 52,001 1,250 2,812 3,165 7,227 59,228 426,102 The Notes on pages 53 to 69 are an integral part of these consolidated financial statements. 50 Mountview AR2020.indd 50 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Consolidated Statement of Changes in Equity for the year ended 31 March 2020 Changes in equity for year ended 31 March 2019 Balance as at 1 April 2018 Profit for the year Dividends Balance at 31 March 2019 Changes in equity for year ended 31 March 2020 Balance as at 1 April 2019 Profit for the year Dividends Balance at 31 March 2020 Share capital £000 Capital reserve £000 Capital redemption reserve £000 Notes Other reserves £000 Retained earnings £000 Total £000 195 195 195 195 10 23 10 23 25 25 25 25 55 55 55 55 56 56 56 56 354,131 28,008 (15,596) 366,543 354,462 28,008 (15,596) 366,874 366,543 28,296 (15,596) 379,243 366,874 28,296 (15,596) 379,574 The Notes on pages 53 to 69 are an integral part of these consolidated financial statements S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 51 27569 7 July 2020 9:52 am Proof 22 51 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Consolidated Cash Flow Statement for the year ended 31 March 2020 Cash flows from operating activities Profit from operations Adjustment for: Depreciation (Gain) on disposal of investment properties Decrease/(Increase) in fair value of investment properties Operating cash flows before movement in working capital Decrease/(Increase) in inventories (Increase) in receivables Increase in payables Cash generated from operations Interest paid Income tax Net cash inflow from operating activities Investing activities Proceeds from disposal of investment properties Purchase of property, plant and equipment Net cash inflow from investing activities Cash flows from financing activities (Repayment) of borrowings Equity dividend paid Net cash (outflow) from financing activities Net Increase/(Decrease) in cash and cash equivalents Opening cash and cash equivalents Cash and cash equivalents at end of year Year ended 31 March 2020 £000 Year ended 31 March 2019 £000 Notes 35,929 35,646 12 13 13 16 17 8 13 12 18 64 (1,174) 969 35,788 315 (1,761) 2,018 36,360 (988) (7,035) 28,337 4,195 (24) 4,171 (16,835) (15,596) (32,431) 77 1,981 2,058 61 – (287) 35,420 (15,505) (56) 969 20,828 (1,079) (5,677) 14,072 – – – (1,863) (15,596) (17,459) (3,387) 5,368 1,981 The Notes on pages 53 to 69 are an integral part of these consolidated financial statements. 52 Mountview AR2020.indd 52 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements for the year ended 31 March 2020 1. GENERAL INFORMATION Mountview Estates P.L.C. (the Company) and its subsidiaries (the Group) is a property trading company with a portfolio in England and Wales. The Company is a public limited liability company incorporated, domiciled and registered in England. The address of its registered office is: 151 High Street, Southgate, London N14 6EW. The Company website is: www.mountviewplc.co.uk. The Company has its premium listing on the London Stock Exchange. These consolidated financial statements have been approved for issue by the Board of Directors on 9 July 2020. 2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (A) BASIS OF PREPARATION The Group’s financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and in accordance with applicable International Financial Reporting Standards (IFRS), as adopted by the EU. The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP. These are presented on pages 75 to 83. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in Note 2(R) ‘Critical Accounting Judgements and Key Areas of Estimation Uncertainty’. (B) BASIS OF CONSOLIDATION The Group’s financial statements incorporate the results of Mountview Estates P.L.C. and all of its subsidiary undertakings made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The Group exercises control through voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. On acquisition, the identifiable assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. The purchase method has been used in consolidating the subsidiary financial statements. All significant inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation within the consolidated accounts. Consistent accounting policies have been used across the Group. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 53 27569 7 July 2020 9:52 am Proof 22 53 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 2. ACCOUNTING POLICIES CONTINUED (C) SEGMENT REPORTING A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group has identified two such segments as follows: • Property Trading • Property Investment The segments are UK based. More details are given in Note 5 on page 60. (D) INCOME TAX The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction, which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. (E) REVENUE Revenue includes proceeds from sales of properties, rental income from properties held as trading stock, investment and other sundry items of revenue before charging expenses. Rental income is recognised on a straight-line and accruals basis over the rental period. Sales of properties are recognised on legal completion as in the Directors’ opinion this is the point at which control passes to the buyer. (F) DIVIDEND DISTRIBUTION Dividend distribution to the Company’s shareholders is recognised as an expense in the Group’s financial statements in the period in which the dividends are approved. (G) INTEREST EXPENSE Interest expense for borrowings is recognised within ‘finance costs’ in the income statement using the effective interest rate method. The effective interest method is a method of calculating the financial liability and of allocating the interest expense over the relevant period. 54 Mountview AR2020.indd 54 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 2. ACCOUNTING POLICIES CONTINUED (H) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset using the straight-line method as follows: Freehold property – 2% per annum Fixtures and fittings and office equipment – 20% per annum Computer equipment – 25% per annum The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each financial year. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the Income Statement. (I) IMPAIRMENT OF ASSETS Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Any impairment is recognised in the Income Statement in the year in which it occurs. (J) INVESTMENT PROPERTY Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated group, is classified as investment property. Investment property is measured initially at its cost including related transaction costs. After initial recognition, investment property is carried at fair value. Fair value is based on active market prices adjusted, if necessary, for any difference in the nature, location or condition of the specified asset. If this information is not available the Group uses alternative valuation methods such as recent prices or less active markets or discounted cash flow projections. Subsequent expenditure is included in the carrying amount of the property when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Gains or losses arising from changes in the fair value of the Group’s investment properties are included in the Income Statement of the period in which they arise. (K) INVENTORIES – TRADING PROPERTIES These comprise residential properties, all of which are held for resale, and are shown in the financial statements at the lower of cost and estimated net realisable value. Cost includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Group expects on sale of a property in its current condition with vacant possession. The analysis of the Group revenue as at 31 March 2020 is on page 59. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 55 27569 7 July 2020 9:52 am Proof 22 55 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 2. ACCOUNTING POLICIES CONTINUED (L) PENSION COSTS The Group operates a stakeholder contribution pension scheme for employees. The annual contributions payable are charged to the Income Statement. The Group has no further payment obligations once the contributions have been paid. (M) FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group has become a party to the contractual provisions of the instrument. Trade and other receivables, trade and other payables, and cash and cash equivalents are measured at amortised cost. (N) BANK BORROWINGS Loans are recorded at fair value at initial recognition and thereafter at amortised costs under the effective interest method. (O) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. (P) LEASING Group as lessor The Group’s non-cancellable operating leases relate to regulated tenancies under which tenants have the right to remain in a property for the remainder of their lives. It is therefore not possible to estimate timing of future minimum payments in respect of these regulated tenancies, hence these are not separately disclosed in the financial statements. Group as lessee Rentals payable under leases for assets considered to be of low value are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the term of the lease. (Q) ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS The standard IFRS16 Leases was effective for the current financial year. This standard replaced IAS17 Leases, however as the Group is a lessor the impact of the change was not significant. The Group’s only operating leases are those for leased cars, which the Directors have determined are not material and which will be recognised on a straight-line basis over the term of the lease. Other standards, interpretation and amendments effective in the current financial year have not had a material impact on the Group financial statements. Other standards, interpretations and amendments issued but not yet effective are not expected to have a material impact on the Group financial statements. (R) CRITICAL ACCOUNTING JUDGEMENTS AND KEY AREAS OF ESTIMATION UNCERTAINTY Going concern The Directors are required to make an assessment of the Group’s ability to continue to trade as a going concern. The two main considerations were as follows: 1. Refinancing of banking facilities The Group has re-negotiated a £20 million (2019: £20 million) revolving loan facility with HSBC Bank. The termination date of this facility is November 2023. The Group has a £60 million (2019: £60 million) revolving loan facility with Barclays Bank. The termination date of this facility is December 2022. 56 Mountview AR2020.indd 56 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 2. ACCOUNTING POLICIES CONTINUED 2. Covenant compliance The core facility has two covenants, Consolidated Gross Borrowings as a percentage of Consolidated Net Tangible Assets, and the ratio of Consolidated PBIT to Consolidated Gross Financing Costs. The Group has remained well within both of these covenants during the year. On the basis of the above, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Distinction between investment and trading property The Group considers the intention at the outset when each property is acquired in order to classify the property as either an investment or a trading property. Where the intention is to either trade the property or where the property is held for immediate sale upon receiving vacant possession within the ordinary course of business, the property is classified as trading property. Where the intention is to hold the property for its long-term rental yield and/or capital appreciation, the property is classified as an investment property. Investment properties In considering the values attributable to the investment portfolio, the following factors are taken into consideration: • sales of properties within the Group’s portfolio during the preceding 12 months • sales of properties in the same district whenever the information is available • published market research concerning the performance of the property market in this region and district • factors affecting individual properties and units in relation to value, and factors in the district which might affect the values of individual properties and units. The valuation of the portfolios was made in accordance with the requirements of the RICS Valuation – Global Standards 2020. Carrying value of trading stock The Group’s residential trading stock is carried in the balance sheet at the lower of cost and net realisable value. As the Group’s business model is to sell trading stock on vacancy, net realisable value is the net sales proceeds which the Group expects on sale of a property with vacant possession. Given that all stock is purchased at a discount to the value with vacant possession the Directors consider the risk of impairment to be low. Inventory expected to be settled in more than 12 months The Board estimates that inventory of £19.5 million will be settled within the next 12 months, with the remaining inventory value expected to be settled in more than 12 months. This estimation is based on the average cost of sales of inventory over the last three year period. Mountview’s business, both historic and current, has involved the purchase for sale of residential properties subject to regulated tenancies, such properties being sold when vacant possession is obtained. Regulated tenancies by their nature are not for any specific period of time and in most cases they do not become vacant until the death of the tenant. It is difficult to predict with any certainty the time at which Mountview’s inventory properties might become vacant. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 57 27569 7 July 2020 9:52 am Proof 22 57 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 1. FINANCIAL RISK FACTORS The Group’s activities expose it to a variety of financial risks: market risk (including price risk and cash flow risk), credit risk and liquidity risk. The Group’s policies on financial risk management are to minimise the risk of adverse effect on performance and to ensure the ability of the Group to continue as a going concern. The financial risks relate to the following financial instruments: trade receivables, cash and cash equivalents, trade and other payables and borrowings. (A) MARKET RISK The Group is exposed to market risk through interest rates and availability of credit. Price risk • The Group is exposed to property price and property rental risk. Cash flow and fair value interest rate risk • As the Group has no significant interest bearing assets, its income and operating cash flows are substantially independent of changes in market interest rates. Long-term borrowings • Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group’s cash flow and fair value interest rate risk is constantly monitored by the Group’s management. The Board is confident that based on the historical performance of the Group, the finance costs are sufficiently covered by the rental income. The Group has two covenants covering Consolidated Gross Borrowings as a percentage of Consolidated Net Tangible Assets, and the ratio of Consolidated PBIT to Consolidated Gross Financing Costs. These covenants were complied with during the financial year. (B) CREDIT RISK Exposure to credit risk and interest risk arises in the normal course of the Group’s business. The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents as well as credit exposures with respect to rental customers, including outstanding receivables. The Directors are of the opinion that credit risk is minimal due to the low level of trade receivables relative to the Balance Sheet totals. Regulated tenants are incentivised through the benefit of their tenancy agreement to avoid default on their rent. Lifetime tenancies are generally at low or zero rent and hence suffer minimal credit risk. (C) LIQUIDITY RISK The Group’s liquidity position is monitored daily by management and is reviewed quarterly by the Board of Directors. The Group ensures that it maintains sufficient cash for operational requirements at all times. The nature of its business is very cash generative from its gross rents and sales of trading properties. In adverse trading conditions, new acquisitions can be minimised, and as a consequence will reduce the gearing level and improve the liquidity. A summary table with the majority of financial liabilities is presented in Note 18. 58 Mountview AR2020.indd 58 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED (D) CAPITAL RISK MANAGEMENT The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total debt and equity. Total borrowings Less cash Net borrowings Total equity Net borrowings plus equity Gearing ratio 2020 £000 33,160 (3,553) 29,607 379,574 409,181 7.2% 2019 £000 48,500 (1,981) 46,519 366,874 413,393 11.3% 4. ANALYSIS OF REVENUE AND COST OF SALES All revenue arises in England and Wales. 1. Rental income from tenancies of occupied properties. The income is recognised on an accruals basis. 2. Sale of stock properties. This is recognised on the date of legal completion. Revenue Gross sales of properties Gross rental income Cost of sales Cost of properties sold Property expenses Gross profit Sales of properties Net rental income 2020 £000 45,651 19,222 64,873 17,686 5,833 23,519 27,965 13,389 41,354 2019 £000 46,430 18,998 65,428 18,973 5,654 24,627 27,457 13,344 40,801 Sales of properties included in the Market Valuation undertaken by Allsop LLP as at 30 September 2014. Value of the Properties included in the Market Valuation as at 30 September 2014 and sold during the year ended 31 March 2020 Properties purchased since 30 September 2014 and sold during the year ended 31 March 2020 Gross sales of properties Allsop Valuation £000 Sales Price £000 29,221 – – 41,819 3,832 45,651 The Market Values were on the basis that properties would be sold subject to any then existing leases and tenancies. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 59 27569 7 July 2020 9:52 am Proof 22 59 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 5. SEGMENTAL INFORMATION A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group monitors its operations in the following segments: Revenue Operating profit before changes in fair value of investment properties Finance costs Profit after tax Assets Liabilities Fixed assets Capital expenditure Depreciation Property trading £000 64,349 35,722 (988) 400,822 41,190 24 60 2020 Property investment £000 524 1,176 – 24,268 4,326 – 4 Group £000 64,873 36,898 (988) 28,296 425,090 45,516 Property trading £000 64,863 35,170 (1,079) 397,787 54,400 24 64 – 53 2019 Property investment £000 565 189 – 28,315 4,828 – 8 Group £000 65,428 35,359 (1,079) 28,008 426,102 59,228 – 61 Revenue of the property investment segment is derived entirely from rental income. Head office costs have been allocated and included within the Group’s two operating segments. The Group’s two main business segments operate within England and Wales. 6. PROFIT FROM OPERATIONS The operating profit is stated after taking into account: Depreciation of tangible fixed assets Gain on disposal of investment property Auditors’ remuneration – the audit of the Parent Company and Consolidated Financial Statements – the audit of the Company’s subsidiaries pursuant to legislation – tax compliance work Operating expenses for investment properties And after crediting: – net rental income – administrative charges to related companies (Note 24) The average monthly number of employees during the year was as follows: Office and management 2020 £000 64 1,174 40 15 – 95 2019 £000 61 – 36 15 4 94 13,389 33 13,344 42 2020 29 2019 29 60 Mountview AR2020.indd 60 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:16 Mountview Estates P.L.C. Annual Report and Accounts 2020 7. STAFF COSTS (INCLUDING DIRECTORS) Wages and salaries Social security costs Pension costs Directors’ remuneration 2020 £000 3,554 490 49 4,093 2019 £000 3,454 430 44 3,928 Total Directors’ remuneration including salary, bonuses and benefits in kind amounted to: 1,933 1,915 The details of Directors’ remuneration are shown in the audited section of the Remuneration Report on page 43. The Company contributes 3% of the total annual gross salaries and bonuses of each employee, excluding Directors, to a Stakeholder Pension Scheme. 8. FINANCE COSTS Interest on bank overdrafts and loans 9. INCOME TAX EXPENSE (a) Analysis of charge in the year Current tax: UK Corporation Tax 19% (2019: 19%) Deferred tax: Current year 19% (2019: 19%) Taxation attributable to the Company and its subsidiaries (b) Factors affecting income tax expense The charge for the year can be reconciled to the profit per the income statement as follows: Profit on ordinary activities before taxation Profit on ordinary activities multiplied by rate of tax 19% (2019: 19%) Expenses not deductible for tax Depreciation in excess of capital allowances Deferred tax Taxation attributable to the Company and its subsidiaries The deferred tax adjustment relates to the change in fair value of investment properties. 2020 £000 988 2020 £000 7,320 (675) 6,645 34,941 6,638 (2) (7) 16 6,645 2019 £000 1,079 2019 £000 6,504 55 6,559 34,567 6,567 6 (14) – 6,559 10. DIVIDENDS On 12 August 2019, a dividend of 200p per share (2018: 200p per share) was paid to the shareholders. On 30 March 2020 a dividend of 200p per share (2019: 200p per share) was paid to the shareholders. This resulted in total dividends paid in the year of £15.6 million (2019: £15.6 million). In respect of the current year, the Directors propose that a final dividend of 200p per share will be paid to the shareholders on 17 August 2020. This dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed final dividend for 2020 is payable to all shareholders on the Register of Members on 10 July 2020. The total estimated final dividend to be paid is £7.8 million. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 61 27569 7 July 2020 9:52 am Proof 22 61 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 11. EARNINGS PER SHARE The calculations of earnings per share are based on the following profits and number of shares: Net profit for financial year (basic and fully diluted) Weighted average number of Ordinary Shares for basic and fully diluted earnings per share Basic and diluted earnings per share The Company has no dilutive potential Ordinary Shares. 12. PROPERTY, PLANT AND EQUIPMENT 2020 £000 2019 £000 28,296 3,899,014 725.7p 28,008 3,899,014 718.3p Cost At 1 April 2019 Additions Disposals At 31 March 2020 Depreciation At 1 April 2019 Charge for the year On disposals At 31 March 2020 Net book value At 31 March 2019 At 31 March 2020 Property, plant and equipment are located within England and Wales. Cost At 1 April 2018 Additions Disposals At 31 March 2019 Depreciation At 1 April 2018 Charge for the year On disposals At 31 March 2019 Net book value At 31 March 2018 At 31 March 2019 Property, plant and equipment are located within England and Wales. Freehold property £000 Fixtures and fittings £000 Computer equipment £000 2,671 – – 2,671 966 53 – 1,019 1,705 1,652 41 – – 41 36 5 – 41 5 – – 24 – 24 – 6 – 6 – 18 Freehold property £000 Fixtures and fittings £000 Computer equipment £000 2,671 – – 2,671 913 53 – 966 1758 1,705 41 – – 41 28 8 – 36 13 5 – – – – – – – – – – Total £000 2,712 24 – 2,736 1,002 64 – 1,066 1,710 1,670 Total £000 2,712 – – 2,712 941 61 – 1,002 1771 1,710 62 Mountview AR2020.indd 62 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 13. INVESTMENT PROPERTIES Fair value at 1 April 2019/(2018) Subsequent expenditure Disposals (Decrease)/Increase in fair value during the year At 31 March 2020/(2019) 2020 £000 28,112 – (3,021) (969) 24,122 2019 £000 27,825 – – 287 28,112 The sales of investments properties are not included in the Group Revenue. During the financial year we disposed of 4 units for £4.195 million (2019: nil). The difference between the sales price of £4.195 million and the market fair value of £3.021 million, resulted in a gain of £1.174 million. This is shown as a separate line item in the Consolidated Statement of Comprehensive Income for the year ended 31 March 2020. The investment properties represent less than 5% of the Group’s portfolio. LOUISE GOODWIN LIMITED AND A.L.G. PROPERTIES LIMITED The companies’ freehold properties were valued on 31 March 2020 by an external valuer Jeremy Mayhew – Sanders MRICS of Allsop LLP. The valuations are in accordance with the requirements of the RICS Valuation – Global Standards 2020. The properties are all held for investment and Market Values are on the basis that the properties would be sold subject to any existing leases and tenancies. The valuer’s opinion of Market Value was derived using comparable recent market transactions on arm’s length terms. The outbreak of the Novel Coronavirus (Covid-19), declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries. Market activity is being impacted in many sectors. As at the valuation date, the Valuers felt that they could attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Indeed, the current response to Covid-19 means that the Valuers were faced with an unprecedented set of circumstances on which to base a judgement. The valuation is therefore reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the RICS Red Book. Consequently less certainty and a higher degree of caution should be attached to the valuation than would normally be the case. This is the fourth year in which Mr Mayhew-Sanders has valued the properties for accounts purposes but the ninth consecutive year in which Allsop LLP has undertaken the work. Allsop LLP has undertaken work for Mountview Estates P.L.C. for longer than 20 years including acquisitions, disposals and valuations. In relation to Allsop LLP’s preceding financial year, the proportion of the total fees payable by Mountview Estates P.L.C. to the total fee income of Allsop LLP was less than 5% which is regarded by the RICS as negligible. The aggregate Market Value of the Group’s interests in its investment portfolios was: LOUISE GOODWIN LIMITED • Freehold: £20,982,000 (Twenty million, nine hundred and eighty two thousand pounds). A.L.G. PROPERTIES LIMITED • Freehold: £3,140,000 (Three million, one hundred and forty thousand pounds). Information relating to the basis of valuation of investment properties and the judgements and assumption adopted by management is set out in Note 2(R) “Critical accounting judgements and key areas of estimation uncertainty”. A revaluation decrease of £969,000 has arisen on valuation of investment properties to Market Value as at 31 March 2020 (2019: increase of £287,000). This is shown as a separate line item in the Consolidated Statement of Comprehensive Income. The Directors are of the opinion that the Fair Value equates to the Market Value. Investment properties are the only assets of the Group measured at fair value. They are categorised as Level 3 within the fair value hierarchy of IFRS13 S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 63 27569 7 July 2020 9:52 am Proof 22 63 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 14. INVESTMENTS FIXED ASSET INVESTMENTS These represent the cost of shares in the following wholly owned subsidiary undertakings, which are incorporated and operate in England and Wales. Their results are consolidated in the accounts of the Group, for the period during which they are subsidiary undertakings. Hurstway Investment Company Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 344034 Louise Goodwin Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 691455 A.L.G. Properties Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Registered in England 508842 Principal activity Property Trading Property Investment Property Investment Cost 2019 2020 £000 1 15,351 2,924 18,276 15. INVENTORIES OF TRADING PROPERTIES Residential properties 2020 £000 392,069 2019 £000 392,384 The Company’s freehold and long leasehold interests in its portfolio of properties held as Trading Stock were valued on 30 September 2014 at £665,866,266 (Six hundred and sixty-five million, eight hundred and sixty-six thousand, two hundred and sixty-six pounds) by an External Valuer, Martin Angel FRICS of Allsop LLP. The valuation showed a spectacular increase in the value of our trading stock, but to a large degree this was because we held the stock over an extended period of years. The individual values were not finely accurate, even though we have no reason to doubt the overall total of the valuation. Thus the valuation is not a useful tool for running the business because we are always going to await vacant possession, and no perceived uplift in value can justify selling a tenanted property. The nature of our business and the rules and conventions under which we operate place no obligation upon us to value our trading stock at any given time and therefore the valuation has not been updated since. 16. TRADE AND OTHER RECEIVABLES Trade receivables Prepayments and accrued income 2020 £000 2,326 1,350 3,676 2019 £000 257 1,658 1,915 The Directors consider that the carrying amount of trade and other receivables approximates their fair value. There are no bad or doubtful debts at the year end. There are no material debts past due, and there are no financial assets that are impaired. 64 Mountview AR2020.indd 64 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 17. TRADE AND OTHER PAYABLES Trade creditors Other taxes and social security costs Other creditors 2020 £000 1,398 251 3,181 4,830 The Directors consider that the carrying amount of trade and other payables approximates their fair value. 18. BANK OVERDRAFTS, LOANS AND CASH Bank overdrafts Bank loans Other loans CASH AND CASH EQUIVALENTS Bank overdrafts Cash Cash and cash equivalents as at 31 March Maturity profile of financial liabilities at 31 March 2020 was as follows: Amounts repayable: In one year or less Between one and five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months The average interest rates paid were as follows: Bank overdrafts Bank loans Other loans 2020 £000 1,495 31,100 565 33,160 2020 £000 (1,495) 3,553 2,058 2020 £000 2,060 31,100 33,160 (2,060) 31,100 2020 % 2.35 2.70 0.50 2019 £000 1,274 248 1,290 2,812 2019 £000 – 47,250 1,250 48,500 2019 £000 – 1,981 1,981 2019 £000 1,250 47,250 48,500 (1,250) 47,250 2019 % 2.25 2.62 0.50 S T N E M E T A T S I L A C N A N F I The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value. The other principal features of the Group’s borrowings are as follows. 1. The Group has a short-term borrowing facility of £10 million (2019: £10 million) with Barclays Bank. This is due for review in November 2020 and the rate of interest payable is: • 1.6% over base rate on overdraft • Headroom of this facility at 31 March 2020 amounted to £8.5 million (2019: £10 million). Mountview AR2020.indd 65 27569 7 July 2020 9:52 am Proof 22 65 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 18. BANK OVERDRAFTS, LOANS AND CASH CONTINUED 2. The Group has a £60 million long-term revolving loan facility with Barclays Bank with a termination date of December 2022. The rate of interest payable on the loan is 1.9% above LIBOR. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its subsidiaries. The loan is not repayable by instalments. Headroom under this facility at 31 March 2020 amounted to £45 million (2019: £25 million). 3. The Group has a £20 million long-term revolving loan facility with HSBC Bank. The termination date for this facility is November 2023. The rate of interest payable on the loan is 2.1% above LIBOR. The loan includes a Negative Pledge. The loan is not repayable by instalments. As at 31 March 2020 headroom under this facility amounted to £3.90 million (2019: £7.75 million). 4. Other loans consisted of loans from connected persons, and companies of which Mr D.M. Sinclair is a Director. The balance outstanding as at 31 March 2020 was £565,000 (2019: £1,250,000). • Interest payable on these loans was at 0.5%. 19. DEFERRED TAX ANALYSIS FOR FINANCIAL REPORTING PURPOSES Deferred tax liabilities Net position at 31 March The movement for the year in the Group’s net deferred tax position was as follows: At 1 April (Credit)/Debit to income for the year At 31 March 2020 £000 4,076 4,076 2020 £000 4,751 (675) 4,076 The following are in deferred tax liabilities recognised by the Group and movements thereon during the period: REVALUATION OF PROPERTIES At 1 April (Credit)/Debit to income for the year At 31 March 2020 £000 4,751 (675) 4,076 2019 £000 4,751 4,751 2019 £000 4,696 55 4,751 2019 £000 4,696 55 4,751 66 Mountview AR2020.indd 66 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 20. FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL ASSETS The Group’s financial assets at the year end, which are measured at amortised cost, consist of cash at bank and in hand of £3.55 million (2019: £1.98 million) and trade receivables. The Directors consider that the carrying amount of cash at bank and in hand approximates their fair value. The trade receivables amounted to £2.326 million (2019: £0.257 million). The Directors consider that the carrying amount of trade receivables approximates their fair value. FAIR VALUE OF BORROWINGS Short-term loans Secured bank loans 2020 £000 2,060 31,100 33,160 2019 £000 1,250 47,250 48,500 Interest charged in the Income Statement for the above borrowings amounted to £0.99 million (2019: £1.08 million). The Directors consider that the carrying amount of borrowings approximates their fair value. The details of the terms of the borrowings together with the average interest rates can be seen in Note 18. As at 31 March 2020 it is estimated that a general increase of 1 point in interest rates would decrease the Group’s profit before tax by approximately £331,600 (2019: £485,000). UNDISCOUNTED MATURITY PROFILE OF FINANCIAL LIABILITIES The following table analyses the Group’s financial liabilities and derivative financial liabilities at the Balance Sheet date into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. As the amounts included in the table are the contractual undiscounted cash flows, these amounts will not always equal the amounts disclosed on the Balance Sheet for borrowings, derivative financial instruments, and trade and other payables. Trade and other payables due within 12 months equal their carrying balances as the impact of discounting is not significant. At 31 March 2020 Interest-bearing loans and borrowings Trade and other payables At 31 March 2019 Interest-bearing loans and borrowings Trade and other payables The Group’s financial liabilities are measured at amortised cost. Less than 1 year £000 2,060 4,830 Between 1 and 5 years £000 31,100 – Less than 1 year £000 Between 1 and 5 years £000 1,250 2,812 47,250 – Over 5 years £000 – – Over 5 years £000 – – Total £000 33,160 4,830 Total £000 48,500 2,812 S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 67 27569 7 July 2020 9:52 am Proof 22 67 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements (Continued) for the year ended 31 March 2020 20. FINANCIAL INSTRUMENTS CONTINUED RECONCILIATION OF MATURITY ANALYSIS At 31 March 2020 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows At 31 March 2019 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows 21. CALLED UP SHARE CAPITAL Authorised: 5,000,000 Ordinary Shares of 5p each Allotted, issued and fully paid: 3,899,014 Ordinary Shares of 5p each 22. OTHER RESERVES Capital reserve Capital redemption reserve Other reserves Less than 1 year £000 2,060 25 2,085 Between 1 and 5 years £000 31,100 2,397 33,497 Less than 1 year £000 Between 1 and 5 years £000 1,250 14 1,264 47,250 5,049 52,299 Over 5 years £000 – – – Over 5 years £000 – – – 2020 £000 250 195 2020 £000 25 55 56 136 Total £000 33,160 2,422 35,582 Total £000 48,500 5,063 53,563 2019 £000 250 195 2019 £000 25 55 56 136 Capital redemption reserve relates to buy-back of the Company’s own shares. The Group does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non-insured risks and at 31 March 2020 stood at £56,000 (2019: £56,000). 23. RETAINED EARNINGS Balance at 1 April 2019 Net profit for the year Dividends paid Balance at 31 March 2020 £000 366,543 28,296 (15,596) 379,243 68 Mountview AR2020.indd 68 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 24. RELATED PARTY TRANSACTIONS 1. During the financial year there were no key management personnel emoluments, other than remuneration. 2. (a) Mountview Estates P.L.C. provides general management and administration services to Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr D.M. Sinclair is a Director. Fees of £33,100 (2019: £41,675) were charged for these services. (b) Included within other loans repayable in less than one year and on demand was a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £465,000 (2019: £1,100,015). Interest was payable on the loan at 0.5%. Interest paid in the year on this loan amounted to £3,260 (2019: £4,133). (c) Included within other loans repayable in less than one year and on demand was a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £100,000 (2019: £150,000). Interest was payable on the loan at 0.5%. Interest paid in the year on this loan amounted to £310 (2019: £505). (d) All of the above loans are unsecured. (e) Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. (f) The only key management are the Directors. 25. DIRECTORS’ ADVANCE CREDITS AND GUARANTEES As at 31 March 2020 the Group owed Mr D.M. Sinclair £38,133 (2019: £119,014) in relation to an informal loan. 26. LEASE COMMITMENTS The future aggregate minimum lease payments payable by the Group under non-cancellable leases are as follows: Lease payments due: Not later than one year Later than one year and not later than five years 2020 £000 42 33 75 2019 £000 39 26 65 S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 69 27569 7 July 2020 9:52 am Proof 22 69 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Independent Auditor’s Report to the members of Mountview Estates P.L.C. year ended 31 March 2020 OPINION We have audited the Group Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion the Group Financial Statements: • give a true and fair view of the state of the Group’s affairs as at 31 March 2020 and of its profit for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Group Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to: • • • the disclosures in the annual report that describe the principal risks and explain how they are being managed or mitigated; the Directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the Directors’ identification of any material uncertainties to the Group’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; • whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or • the Directors’ explanation in the annual report as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. 70 Mountview AR2020.indd 70 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Group Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. • Revenue recognition – refer to page 54 for the Group’s accounting policy in respect of revenue recognition Under International Standard on Auditing (ISA) (UK) 240 there is a presumption that there is a risk of fraud in revenue recognition. Revenue is also one of the Group’s key performance indicators. We therefore identified revenue recognition as a significant risk. We verified the occurrence of property sales by selecting an appropriate sample of those sales during the year and verifying to both completion statements and bank transactions. We also reconciled property stock movements and performed appropriate cut off procedures to ensure that sales were recorded in the correct accounting period. We tested rental income for completeness by sampling from property stock, reviewing the underlying rental agreement and tracing to recorded rental income. Based on our audit testing we did not identify any material instances of revenue not being recognised in accordance with the Group’s accounting policy. • Carrying value of property inventory and the potential impact of the Covid-19 pandemic – refer to page 55 for the Group’s accounting policy in respect of the value of property inventory Property inventory is the Group’s most significant asset and is carried at the lower of cost and net realisable value (“NRV”). NRV is based on vacant possession and is subject to change, largely based on movements in the property market. We assessed an increased risk this year due to the potential downwards movement in property prices caused by the Covid-19 pandemic. We therefore determined the valuation of inventory to be a significant risk. We reviewed sales of all properties sold during the year and for a suitable period after the year end to ensure that there was no evidence of properties being sold for less than cost that might indicate potential impairment. We reviewed property purchases during the year to confirm that these were purchased at a discount to market value with vacant possession. We also looked at market data as an indicator of potential impairment. Finally, we selected a sample of individual properties from inventory. For these we estimated market value with vacant possession, and applied an appropriate discount to reflect a potential decrease in property prices due to Covid-19. We then compared the result with the property cost as recorded in the Group’s records. Based on our audit testing we found the carrying value of inventory to be acceptable. • Valuation of investment properties – refer to page 55 for the Group’s accounting policy in respect of the value of investment properties Investment properties were assessed as a significant risk as these are material to the Group balance sheet and are subject to judgement and estimation in arriving at fair value. Particularly this year, with the potential impact of the Covid-19 pandemic on year-end property prices, there was considered to be greater estimation uncertainty in the valuation. The investment properties are valued annually by a suitably independent and qualified valuer as disclosed in note 13 to the financial statements. To address this risk we reviewed the terms of engagement of the valuer and the valuation assumptions used and the valuation workings. We also discussed the methodology used with the valuer and compared the revaluation with our expectation based on market data. We also reviewed the valuer’s judgement to revalue the properties downwards to reflect the estimated impact of Covid-19. We considered the reasonableness of the discount applied based on a review of property market commentary and emerging price data. We additionally ensured that the increased uncertainty was appropriately disclosed in the financial statements. Based on our audit testing we consider the valuation of investment property to be acceptable. OUR APPLICATION OF MATERIALITY We determined materiality for the Group to be £4.2 million, which is approximately 1% of gross assets. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatements and determining the nature, timing and extent of further audit procedure. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 71 27569 7 July 2020 9:52 am Proof 22 71 07/07/2020 09:53:17 Mountview Estates P.L.C. Annual Report and Accounts 2020 Independent Auditor’s Report (Continued) to the members of Mountview Estates P.L.C. year ended 31 March 2020 We concluded that determining materiality based on gross assets was more consistent with industry peers and appropriately reflects the nature of the business. In addition, we applied lower materiality of £1.7m to specific income statement items, being net trading profits, rental income, rental expenses, administrative expenses and finance charges, and £170k for Directors transactions. We believe misstatement of these specific income statement items and directors’ transactions of a lesser amount than materiality for the financial statements as a whole could reasonably be expected to influence the Company’s members’ assessment of the financial performance of the Group. We agreed with the Audit Committee that we would report to them corrected and uncorrected differences in excess of 5% of the materiality level, as well as differences below that threshold that in our view warranted reporting on qualitative grounds. AN OVERVIEW OF THE SCOPE OF OUR AUDIT The Group reports its operating results and financial position along two business lines, being UK residential trading properties and investment properties. The Parent Company and all three subsidiaries are audited by BSG Valentine (UK) LLP. The accounting books and records for all business lines are located at the Group’s head office in North London. In our audit we tested and examined information, using sampling and other techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We reviewed the Group’s internal controls and obtained our audit evidence through substantive procedures. How the scope of our audit addressed each key audit matter is described above under Key audit matters. OTHER INFORMATION The Directors are responsible for the other information. The other information comprises the information included in the Annual report, other than the Financial Statements and our auditor’s report thereon. Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the Group Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Group Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the Group Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions: • Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or • Audit committee reporting – the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or • Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. 72 Mountview AR2020.indd 72 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit • the information given in the Strategic Report and the Directors’ Report for the financial year for which the Group Financial Statements are prepared is consistent with the Financial Statements; and the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. • MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • certain disclosures of Directors’ Remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Group Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of Group Financial Statements that are free from material misstatement, whether due to fraud or error. In preparing the Group Financial Statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE GROUP FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the Group Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group Financial Statements. We identified and assessed the risks of material misstatement in respect of irregularities, including fraud and non- compliance with laws and regulations. Our procedures included enquiry of management and the audit committee, together with a review of supporting documentation such as board minutes and audit committee meeting minutes. We also performed analytical review procedures to identify any unusual relationships that may indicate a material misstatement, and additionally tested the appropriateness of journals to address the risk of fraud through management override of controls. We also performed appropriate testing in respect of the risk of fraud in revenue recognition as described in key audit matters. Relevant laws and regulations, together with potential fraud risks, were communicated to the audit engagement team at the planning stage to ensure they remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. The risk of not detecting a material misstatement resulting from fraud or other irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control and may involve any area of law and regulation not just those directly affecting the financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 73 27569 7 July 2020 9:52 am Proof 22 73 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Independent Auditor’s Report (Continued) to the members of Mountview Estates P.L.C. year ended 31 March 2020 OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS We were appointed by the Directors on 18 March 2020. The period of total uninterrupted engagement is 14 years for the year ended 31 March 2020. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group and we remain independent of the Group in conducting our audit. Our audit opinion is consistent with the additional report to the Audit Committee. We have reported separately on the Parent Company Financial Statements of Mountview Estates P.L.C for the year ended 31 March 2020. The opinion in that report is unmodified. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES This report is made solely to the company’s members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Gary Allen FCA (Senior Statutory Auditor) For and on behalf of BSG Valentine (UK) LLP Chartered Accountants & Statutory Auditor Lynton House 7 – 12 Tavistock Square London WC1H 9BQ 9 July 2020 74 Mountview AR2020.indd 74 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Company Balance Sheet under UK GAAP for the year ended 31 March 2020 Fixed assets Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Called up share capital Capital redemption reserve Capital reserve Other reserves Profit and loss account Approved by the Board on 9 July 2020. D.M. Sinclair Chief Executive M.M. Bray Director 31 March 2020 £000 31 March 2019 £000 Notes 4 5 6 7 10 8 9 12 13 13 13 14 1,670 18,276 19,946 363,195 3,570 3,451 370,216 (25,664) 344,552 364,498 (31,100) 333,398 195 55 25 39 333,084 333,398 1,705 18,276 19,981 363,054 1,781 1,843 366,678 (16,419) 350,259 370,240 (47,250) 322,990 195 55 25 39 322,676 322,990 The Notes on pages 77 to 83 are an integral part of the Parent Company financial statements. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 75 27569 7 July 2020 9:52 am Proof 22 75 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Company Cash Flow under UK GAAP for the year ended 31 March 2020 Cash Flows from Operating Activities Profit from operations Adjustments for: Depreciation Interest payable and similar charges Tax on profit on ordinary activities Increase/(Decrease) in accrued income Changes in: Stocks Trade and other debtors Trade and other creditors Cash generated from operations Interest paid Tax paid Net cash inflow from operating activities Cash Flows from Investing Activities Purchase of property, plant and equipment Net cash used in financing activities Cash Flows from Financing Activities (Repayment) of borrowings Increase of loans from Group undertakings Dividends paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of year Year ended 31 March 2020 £000 Year ended 31 March 2019 £000 Notes 26,004 26,086 4 8 6 7 4 8 59 988 6,087 159 (141) (1,789) 1,895 33,262 (988) (6,182) 26,092 (24) (24) (16,835) 6,476 (15,596) (25,955) 113 1,843 1,956 53 1,079 6,107 (10) (15,327) 367 949 19,304 (1,079) (5,098) 13,127 – – (1,863) 922 (15,596) (16,537) (3,410) 5,253 1,843 The Notes on pages 77 to 83 are an integral part of the Parent Company financial statements. 76 Mountview AR2020.indd 76 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Financial Statements under UK GAAP for the year ended 31 March 2020 1. STATEMENT OF COMPLIANCE These financial statements have been prepared in compliance with FRS 102, ‘The Financial Reporting Standard applicable in the UK and the Republic of Ireland’. 2. ACCOUNTING POLICIES BASIS OF PREPARATION The financial statements have been prepared on the historical cost basis. The financial statements are prepared in sterling, which is the functional currency of the entity. The Company has taken advantage of the exemption in section 408 of the Companies Act from disclosing its individual profit and loss account. REVENUE RECOGNITION Turnover includes proceeds of sales of properties, rents from properties which are held as trading stock, or investment and any other sundry items of revenue before charging expenses. Rental income is recognised on a straight-line and accruals basis over the rental period. Sales of properties are recognised on completion. INCOME TAX The taxation expense represents the aggregate amount of current and deferred tax recognised in the reporting period. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, tax is recognised in other comprehensive income or directly in equity, respectively. Current tax is recognised on taxable profit for the current and past periods. Current tax is measured at the amounts of tax expected to pay or recover using the tax rates and laws that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised in respect of all timing differences at the reporting date. Unrelieved tax losses and other deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference. LEASING Company as lessor The Company’s non-cancellable operating leases relate to regulated tenancies under which tenants have the right to remain in a property for the remainder of their lives. It is therefore not possible to estimate timing of future minimum payments in respect of these regulated tenancies, hence these are not separately disclosed in the financial statements. Group as lessee Rentals payable under operating leases are recognised as an expense on a straight-line basis over the term of the lease. TANGIBLE ASSETS Tangible assets are initially recorded at cost, and subsequently stated at cost less any accumulated depreciation and impairment losses. Any tangible assets carried at revalued amounts are recorded at the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 77 27569 7 July 2020 9:52 am Proof 22 77 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Financial Statements under UK GAAP (Continued) for the year ended 31 March 2020 2. ACCOUNTING POLICIES CONTINUED DEPRECIATION Depreciation is calculated so as to write off the cost or valuation of an asset, less its residual value, over the useful economic life of that asset using the straight-line method as follows: Freehold property Fixtures and fittings Computer equipment INVESTMENTS – 2% per annum – 20% per annum – 25% per annum Fixed asset investments are initially recorded at cost, and subsequently stated at cost less any accumulated impairment losses. IMPAIRMENT OF FIXED ASSETS A review for indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date. For the purposes of impairment testing, when it is not possible to estimate the recoverable amount of an individual asset, an estimate is made of the recoverable amount of the cash-generating unit to which the asset belongs. The cash- generating unit is the smallest identifiable group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised in the Company’s balance sheet when the Company has become a party to the contractual provisions of the instrument. Trade and other receivables, trade and other payables, loans and cash and cash equivalents are measured at amortised cost. STOCKS These comprise residential properties, all of which are held for resale and are valued at the lower of cost and estimated net realisable value. Cost to the Company includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Company expects on sale of the property with vacant possession in its current condition. PENSION COSTS Contributions to defined contribution plans are recognised as an expense in the period in which the related service is provided. Prepaid contributions are recognised as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund. CRITICAL ACCOUNTING JUDGEMENTS AND KEY AREAS OF ESTIMATION UNCERTAINTY Going concern The Directors are required to make an assessment of the Company’s ability to continue to trade as a going concern. The two main considerations were as follows: 1. Refinancing of banking facilities The Company has a £20 million (2019: £20 million) revolving loan facility with HSBC Bank with a termination date of November 2023. The Company has a £60 million (2019: £60 million) revolving loan facility with Barclays Bank. The term termination date of this facility is December 2022. 78 Mountview AR2020.indd 78 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 2. ACCOUNTING POLICIES CONTINUED 2. Covenant compliance The core facility has two covenants, Consolidated Gross Borrowing as a percentage of Consolidated Net Tangible Assets, and the ratio of Consolidated PBIT to Gross Financing Costs. The Company has remained well within both of these covenants during the year. On this basis, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Carrying value of trading stock The Company’s residential trading stock is carried in the balance sheet at the lower of cost and net realisable value. As the Company’s business model is to sell trading stock on vacancy, net realisable value is the net sales proceeds which the Company expects on sale of a property with vacant possession. Given that all stock is purchased at a discount to the value with vacant possession the Directors consider the risk of impairment to be low. Inventory expected to be settled in more than 12 months The Board estimates that inventory of £19.5 million will be settled within the next 12 months, with the remaining inventory value expected to be settled in more than 12 months. This estimation is based on the average cost of sales of inventory over the last three year period. Mountview’s business, historic and current has involved the purchase for sale of residential properties subject to regulated tenancies, such properties being sold when vacant possession is obtained. Regulated tenancies by their nature are not for any specific period of time and in most cases they do not become vacant until the death of the tenant. It is difficult to predict with any certainty the time at which Mountview’s inventory properties might become vacant. 3. STAFF COSTS (INCLUDING DIRECTORS) Wages and salaries Social security costs Pension costs DIRECTORS’ REMUNERATION Total Directors’ remuneration including salary and bonuses and benefits in kind amounted to: 2020 £000 3,554 490 49 4,093 2020 £000 1,933 2019 £000 3,454 430 44 3,928 2019 £000 1,915 The details of Directors’ remuneration are shown in the audited section of the Remuneration Report on page 43. The Company contributes 3% of the total annual gross salaries and bonuses of each employee, excluding Directors, to a Stakeholder Pension Scheme. The average monthly number of employees during the year was as follows: Office and management 2020 29 2019 29 S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 79 27569 7 July 2020 9:52 am Proof 22 79 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Financial Statements under UK GAAP (Continued) for the year ended 31 March 2020 4. TANGIBLE ASSETS Cost At 1 April 2019 Additions Disposals At 31 March 2020 Depreciation At 1 April 2019 Charge for the year On disposals At 31 March 2020 Net book value At 31 March 2019 At 31 March 2020 All tangible assets of the Company are located within England and Wales. 5. INVESTMENTS Cost At 1 April 2019 and 31 March 2020 Impairment At 1 April 2019 and 31 March 2020 Carrying amount At 31 March 2020 The Company owns 100% of the Ordinary Share capital of the following companies: Freehold property £000 Computer equipment £000 2,671 – – 2,671 966 53 – 1,019 1,705 1,652 - 24 – 24 - 6 – 6 - 18 Total £000 2,671 24 – 2,695 966 59 – 1,025 1,705 1,670 Shares in Group undertakings £000 18,276 – 18,276 Subsidiary undertaking Hurstway Investment Company Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW Louise Goodwin Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW A.L.G. Properties Limited Registered Office: Mountview House, 151 High Street, Southgate, London, N14 6EW 6. STOCKS Residential properties 7. DEBTORS: DUE WITHIN ONE YEAR Trade debtors Prepayments and accrued income 80 Country of incorporation Principal activity England, UK No: 344034 England, UK No: 691455 England, UK No: 508842 Property Trading Property Investment Property Investment 2020 £000 363,195 2019 £000 363,054 2020 £000 2,326 1,244 3,570 2019 £000 257 1,524 1,781 Mountview AR2020.indd 80 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdraft Amounts owed to Group undertakings Accruals and deferred income Corporation Tax Other taxes and social security costs Other creditors Other loans 2020 £000 1,495 15,902 1,357 2,913 251 3,181 565 25,664 Other loans consist of loans from connected persons. Interest payable on these loans was at 0.5%. 9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Bank loans Maturity profile of financial liabilities at 31 March 2020 was as follows: Amounts repayable: Between one and five years 2020 £000 31,100 31,100 2020 £000 31,100 31,100 2019 £000 – 9,426 1,198 3,008 248 1,289 1,250 16,419 2019 £000 47,250 47,250 2019 £000 47,250 47,250 The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value. The other principal features of the Company’s borrowings are as follows. 1. The Company has a short-term borrowing facility of £10 million (2019: £10 million) with Barclays Bank. This is due for review in November 2020 and the rate of interest payable is: • 1.6% over base rate on overdraft. Headroom of this facility at 31 March 2020 amounted to £8.5 million (2019: £10 million). 2. The Company has a £60 million (2019: £60 million) long-term revolving loan facility with Barclays Bank with a termination date of December 2022. The rate of interest payable on the loan is 1.9% above LIBOR. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its subsidiaries. The loan is not repayable by instalments. Headroom under this facility at 31 March 2020 amounted to £45 million (2019: £25 million). 3. The Company has a £20 million (2019: £20 million) long-term revolving loan facility with HSBC Bank. The termination date for this facility is November 2023. The rate of interest payable on the loan is 2.1% above LIBOR. The loan includes a Negative Pledge. The loan is not repayable by instalments. As at 31 March 2020 headroom under this facility amounted to £3.9million (2019: £7.75 million). 4. Other loans which were repaid during the year consisted of loans from connected persons, and companies of which Mr D.M. Sinclair is a Director. The balance outstanding as at 31 March 2020 was £565,000 (2018: £1,250,000). Interest payable on these loans was at 0.5%. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 81 27569 7 July 2020 9:52 am Proof 22 81 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notes to the Financial Statements under UK GAAP (Continued) for the year ended 31 March 2020 10. CASH AND CASH EQUIVALENTS Bank overdraft Cash Cash and cash equivalents as at 31 March Maturity profile of financial liabilities at 31 March 2020 was as follows: Amounts repayable: In one year or less Between one and five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months 11. FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL ASSETS 2020 £000 (1,495) 3,451 1,956 2020 £000 2,060 31,100 33,160 (2,060) 31,100 2019 £000 – 1,843 1,843 2019 £000 1,250 47,250 48,500 (1,250) 47,250 The Company’s financial assets at the year end consist of trade receivables and cash at bank and in hand of £3.451 million (2019: £1.843 million). The Directors consider that the carrying amount of cash at bank and in hand approximates their fair value. The trade receivables amounted to £2.326 million (2019: £0.257 million). The Directors consider that the carrying amount of trade receivables approximates their fair value. FAIR VALUE OF BORROWINGS Short-term loans Secured bank loans and overdrafts 2020 £000 565 32,595 33,160 2019 £000 1,250 47,250 48,500 Interest charged in the Income Statement for the above borrowings amounted to £0.99 million (2019: £1.08 million). The Directors consider that the carrying amount of borrowing approximates their fair value. The details of the terms of the borrowings can be seen in Note 9. As at 31 March 2020 it is estimated that a general increase of 1 point in interest rates would decrease the Company’s profit before tax by approximately £331,600 (2019: £485,000). 12. CALLED UP SHARE CAPITAL Authorised: 5,000,000 Ordinary Shares of 5p each Allotted, issued and fully paid: 3,899,014 Ordinary Shares of 5p each 2020 £000 250 195 2019 £000 250 195 82 Mountview AR2020.indd 82 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:18 Mountview Estates P.L.C. Annual Report and Accounts 2020 13. OTHER RESERVES Capital redemption reserve Capital reserve Other reserves Balance at 31 March 2020 £000 55 25 39 119 2019 £000 55 25 39 119 Capital redemption reserve relates to buy-back of the Company’s own shares. The Company does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non-insured risks and at 31 March 2020 stood at £39,000 (2019: £39,000). 14. PROFIT AND LOSS ACCOUNT Balance at 1 April 2019-2018 Net profit for the year Dividends paid Balance at 31 March 2020 £000 322,676 26,004 (15,596) 333,084 2019 £000 312,186 26,086 (15,596) 322,676 15. RELATED PARTY TRANSACTIONS During the financial year there were no key management personnel emoluments, other than remuneration. a. Mountview Estates P.L.C. provides general management and administration services to Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr D.M. Sinclair is a Director. Fees of £33,100 (2019: £41,6756) were charged for these services. b. Included within other loans repayable in less than one year and on demand was a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £465,000 (2019: £1,100,015). Interest was payable on the loan at 0.5%. Interest paid in the year on this loan amounted to £3,260 (2019: £4,133). c. Included within other loans repayable in less than one year and on demand was a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £100,000 (2019: £150,000). Interest was payable on the loan at 0.5%. Interest paid in the year on this loan amounted to £310 (2019: £505). d. All of the above loans are unsecured. e. Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. f. The only key management are the Directors. 16. DIRECTOR’S ADVANCE, CREDITS AND GUARANTEES As at 31 March 2020 the Company owed Mr D.M. Sinclair £38,133 (2019: £119,014) in relation to an informal loan. 17. LEASE COMMITMENTS At 31 March 2020 the Company had aggregate annual commitments under non-cancellable operating leases as follows. S T N E M E T A T S I L A C N A N F I Operating lease payments due: Not later than one year Later than one year and not later than five years Mountview AR2020.indd 83 27569 7 July 2020 9:52 am Proof 22 2020 £000 42 33 75 2019 £000 39 26 65 83 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Independent Auditor’s Report to the members of Mountview Estates P.L.C. year ended 31 March 2020 OPINION We have audited the Parent Company Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2020 which comprises the Company Balance Sheet, Company Cash Flow and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion the Parent Company Financial Statements: • give a true and fair view of the state of the Parent Company’s affairs as at 31 March 2020; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the parent company financial statements section of our report. We are independent of the Parent Company in accordance with the ethical requirements that are relevant to our audit of the Parent Company Financial Statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATING TO GOING CONCERN We have nothing to report in respect of the following matter in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to in relation to: • the Directors’ statement in the Parent Company Financial Statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the Parent Company Financial Statements and the Directors’ identification of any material uncertainties to the Parent Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the Parent Company Financial Statements. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Parent Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Parent Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters relating to both the Parent Company and the Group were revenue recognition and valuation of trading properties. An explanation of these matters and how these were addressed during our audit can be found in our audit report on the Group Financial Statements on page 71. We identified one key audit matter that related solely to the Parent Company, which was the recoverability of investments in subsidiaries. Investments in subsidiaries are stated at cost as described in the Parent Company’s accounting policies on page 78. The cost of investment should be supported by the underlying value of the subsidiaries. We tested this by a review of the subsidiaries’ year-end financial statements. We used their net assets as an approximation of recoverable value and compared these to the cost of investment in the Parent Company. Based on our audit testing we are satisfied with the recoverability of investments in subsidiaries. 84 Mountview AR2020.indd 84 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 OUR APPLICATION OF MATERIALITY We determined materiality for the Company to be £3.8 million, which is approximately 1% of gross assets. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatements and determining the nature, timing and extent of further audit procedure. We concluded that determining materiality based on gross assets was more consistent with industry peers and appropriately reflects the nature of the business. In addition, we applied lower materiality of £1.6m to specific income statement items, being net trading profits, rental income, rental expenses, administrative expenses and finance charges, and £160k for Directors transactions. We believe misstatement of these specific income statement items and Directors’ transactions of a lesser amount than materiality for the financial statements as a whole could reasonably be expected to influence the Company’s members’ assessment of the financial performance of the Company. We agreed with the Audit Committee that we would report to them corrected and uncorrected differences in excess of 5% of the materiality level, as well as differences below that threshold that in our view warranted reporting on qualitative grounds. AN OVERVIEW OF THE SCOPE OF OUR AUDIT In our audit we tested and examined information, using sampling and other techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We reviewed the Company’s internal controls and obtained our audit evidence through substantive procedures. How the scope of our audit addressed each key audit matter is described above under Key audit matters. S T N E M E T A T S I L A C N A N F I OTHER INFORMATION The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the Parent Company Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Parent Company Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement of the Parent Company Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the Parent Company Financial Statements are prepared is consistent with the Parent Company Financial Statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Mountview AR2020.indd 85 27569 7 July 2020 9:52 am Proof 22 85 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Independent Auditor’s Report (Continued) to the members of Mountview Estates P.L.C. year ended 31 March 2020 MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company Financial Statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ Remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the Statement of the Directors’ Responsibilities, the Directors are responsible for the preparation of the Parent Company Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of Parent Company Financial Statements that are free from material misstatement, whether due to fraud or error. In preparing the Parent Company Financial Statements, the Directors are responsible for assessing the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Parent Company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE PARENT COMPANY FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the Parent Company Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Parent Company Financial Statements. We identified and assessed the risks of material misstatement in respect of irregularities, including fraud and non- compliance with laws and regulations. Our procedures included enquiry of management and the audit committee, together with a review of supporting documentation such as board minutes and audit committee meeting minutes. We also performed analytical review procedures to identify any unusual relationships that may indicate a material misstatement, and additionally tested the appropriateness of journals to address the risk of fraud through management override of controls. We also performed appropriate testing in respect of the risk of fraud in revenue recognition as described in key audit matters. Relevant laws and regulations, together with potential fraud risks, were communicated to the audit engagement team at the planning stage to ensure they remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. The risk of not detecting a material misstatement resulting from fraud or other irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control and may involve any area of law and regulation not just those directly affecting the financial statements. A further description of our responsibilities for the audit of the Parent Company financial statements is located on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 86 Mountview AR2020.indd 86 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS We were appointed by the Directors on 18 March 2020. The period of total uninterrupted engagement is 14 years for the year ended 31 March 2020. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Parent Company and its controlled undertakings and we remain independent of the Parent Company and its controlled undertakings in conducting our audit. Our audit opinion is consistent with the additional report to the Audit Committee. We have reported separately on the Group Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2020. That report includes details of the group key audit matters. The opinion in that report is unmodified USE OF OUR REPORT This report is made solely to the Company’s members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Gary Allen FCA (Senior Statutory Auditor) For and on behalf of BSG Valentine (UK) LLP Chartered Accountants & Statutory Auditor Lynton House 7 - 12 Tavistock Square London WC1H 9BQ 9 July 2020 S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 87 27569 7 July 2020 9:52 am Proof 22 87 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Table of Comparative Figures (unaudited) for the year ended 31 March 2020 IFRS 2014 £000 66,150 35,394 6,952 28,442 729.5p 200p 3.64 7,798 2,598 1,132 IFRS 2015 £000 71.331 39,976 8,159 31,817 816.0p 275p 2.98 10,722 3,020 1,324 IFRS 2016 £000 79,765 48,388 9,676 38,712 992.9p 300p 3.31 11,698 3,631 1,604 IFRS 2017 £000 78,232 44,986 8,761 36,225 929.1p 300p 3.17 11,698 3,747 1,768 IFRS 2018 £000 70,272 36,905 7,024 29,881 766.4p 400p 1.92 15,596 3,743 1,669 As at 31 March 2020 IFRS 2020 £000 64,873 34,941 6,645 28,296 725.7p 400p 1.81 15,596* 4,093 1,756 IFRS 2019 £000 65,428 34,567 6,559 28,008 718.3p 400p 1.75 15,596 3,928 1,667 33.32% 28.17% 31.04% 32.03% 24.00% 25.19% 26.24% 43.57% 43.84% 44.18% 47.18% 44.59% 42.44% 42.90% 14.52% 12.35% 13.71% 15.11% 10.70% 10.69% 11.26% 3.20% 3.31% 3.31% 3.93% 4.52% 4.82% 5.03% Revenue Profit before taxation Taxation Profit after taxation Earnings per share Rate of dividend Cover Cost of dividend Total remuneration (including Directors) Executive Directors’ remuneration Total remuneration (including Directors) as a percentage of dividend Cost of Executive Directors’ remuneration as a percentage of total remuneration Cost of Executive Directors’ remuneration as a percentage of dividend Executive Directors’ remuneration as a percentage of profit before taxation * The £15.6 million dividend in relation to 2020 is made up of the interim dividend of £7.80 million and the final dividend of £7.80 million, which will be paid on 17 August 2020, subject to approval at the AGM on 12 August 2020. 88 Mountview AR2020.indd 88 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notice of Meeting IMPORTANT INFORMATION ON FORMAT OF THE ANNUAL GENERAL MEETING At the date of the Notice of Meeting, due to the restrictions imposed by Government guidance to address the Covid-19 outbreak and to protect the health and well-being of shareholders, the Company’s Directors, employees and advisers, the Directors have reluctantly decided that the 2020 Annual General Meeting (the AGM) cannot follow the usual format. The recently enacted Corporate Insolvency and Governance Act 2020 provides certainty on how general meetings, including annual general meetings, may be held prior to 30 September 2020. In light of this legislation and of the social distancing measures and Government restrictions on public gatherings, this year the AGM will be held with only the minimum number of shareholders present as required to form a quorum under the Company’s Articles of Association (Articles) and only to conduct the formal business of the meeting (facilitated by the Company). There will be no formal presentations by the Executive Directors. To ensure everyone’s safety no other shareholders will be permitted entry to the AGM. Shareholder participation is important to the Directors and all shareholders are encouraged to vote ahead of the AGM by appointing a proxy to vote on the resolutions set out in the notice of AGM (see page 90) as soon as possible and in any event by 11.30 a.m. on 10 August 2020. Shareholders are strongly encouraged to appoint the Chairman of the Meeting as their proxy in order that the Chairman can vote according to the shareholder’s wishes at the AGM to ensure their votes on the resolutions are counted. Other named proxies will not be allowed to attend the Meeting and therefore votes of such proxies will not be counted at the AGM. Shareholders can vote ahead of the AGM, either by completing and returning a Proxy Form or by appointing a proxy electronically via our registrars’ website by visiting www.signalshares.com. Shareholders will need their Investor Code which can be located on their share certificate or recent dividend confirmation. Full instructions are given on the website. All resolutions for consideration at the AGM will be voted on a poll, rather than a show of hands, and all valid proxy votes cast will count towards the poll votes. The results will be announced via a regulatory announcement and will be posted on the Company’s website as soon as practicable after the AGM. Despite the exceptional circumstances, as well as shareholder participation at the AGM, engagement with our shareholders is important to the Company and the Directors. Therefore, arrangements have been made so that shareholders can participate in the AGM by submitting questions in advance. Any specific questions on the business of the AGM and on the resolutions can be submitted ahead of the AGM by email to reception@mountviewplc.co.uk or by writing to the Company Secretary, Mountview House, 151 High Street, Southgate, London N14 6EW. To enable shareholders to have time to consider the responses to questions ahead of the voting deadline on 10 August 2020, please submit questions as soon as possible and in any event no later than 31 July 2020. Responses to relevant questions submitted by 31 July 2020 will be provided, by way of a written Q&A, grouped into themes, posted on the Company’s website as soon as practicable in advance of the AGM, and no later than 8 August 2020. Some, but not all, questions may receive individual responses. For questions received after 31 July 2020, the Directors will endeavour to provide answers as soon as practicable but responses may be provided after 8 August 2020. The Directors anticipate the Q&A will be grouped into themes, and where there is overlap in submitted questions on similar or related themes one response will be provided covering the specific issue. Responses will not be provided to questions which do not relate to the business of the meeting or that the Directors determine require the disclosure of confidential or commercially sensitive information or are already answered on the website or are already addressed elsewhere including in the annual report and accounts. The Company reserves the right to answer questions only from shareholders or those otherwise legally permitted to raise questions at the Company’s AGM. The situation relating to Covid-19 continues to develop and the Directors will continue to monitor closely the situation, as well as the latest Government guidance, as to how it may affect arrangements for the AGM, which may have to change at short notice. If it becomes necessary to change the arrangements for the AGM, information will be found on the Company’s website and via a regulatory announcement. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 89 27569 7 July 2020 9:52 am Proof 22 89 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notice of Meeting (Continued) NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the 83rd Annual General Meeting of the Members of Mountview Estates P.L.C. (incorporated in England and Wales with registered number 00328020) (the Company) will be held on 12 August 2020 at 11.30am for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed as ordinary resolutions: 1. To receive and consider the Reports of the Directors and the Auditors and the audited Statements of Accounts of the Company for the year ended 31 March 2020. 2. To declare a final dividend of 200 pence per share payable on 17 August 2020 to shareholders on the register at 10 July 2020. 3. To re-elect Mrs M.M. Bray as a Director of the Company. 4. To re-elect Mr D.M. Sinclair as a Director of the Company. 5. To re-elect Ms M.L. Archibald (formerly Jarvis) as a Director of the Company, provided that resolution 12 is passed. 6. To re-elect Mr A.W. Powell as a Director of the Company, provided that resolution 13 is passed. 7. To re-elect Dr A.R. Williams as a Director of the Company. 8. To approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration Policy) in the Annual Report and Accounts for the year ended 31 March 2020. 9. To approve the Directors’ Remuneration Policy set out on pages 38 to 42 of the Directors’ Remuneration Report which is contained in the Annual Report and Accounts for the year ended 31 March 2020, such Policy to take effect from the conclusion of the Annual General Meeting. 10. To elect Messrs BSG Valentine as auditors of the Company to hold office from the conclusion of this meeting to the conclusion of the next general meeting at which the Company’s annual report and accounts are laid before the meeting. 11. To authorise the Directors to determine the Auditors’ remuneration for the ensuing year. In accordance with Listing Rule 9.2.2ER notice is also hereby given for the independent shareholders of the Company only: 12. To re-elect Ms M.L. Archibald (formerly Jarvis) as a Director of the Company, provided that resolution 5 is passed. 13. To re-elect Mr A.W. Powell as a Director of the Company, provided that resolution 6 is passed. By Order of the Board M.M. Bray Company Secretary Mountview House 151 High Street Southgate London N14 6EW 9 July 2020 90 Mountview AR2020.indd 90 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 IMPORTANT NOTE PLEASE READ: In contrast with previous years when conventional AGMs have been held and you were able to attend in person at the meeting, along with the Directors and other shareholders, this year for the reasons explained on page 89 (Important information on format of the annual general meeting) that is not going to be possible for the safety of all shareholders and Directors. This year, the arrangements for the 2020 AGM have been changed and the notes that accompany the Notice of Meeting have been modified to reflect such requirements, including the altered means for shareholders to participate in the 2020 AGM. Although shareholders are not able to attend the AGM in person, shareholders can and are very much encouraged to participate by submitting proxy votes, electronically or by proxy form by post, and questions on the business of the meeting in advance of the AGM. In particular please note the following for this year’s AGM: • unlike in previous years, you, or any named proxy (other than the Chairman of the Meeting), will not be able to attend the AGM in person – shareholder engagement is important to the Directors and a facility for submitting questions in advance of the AGM is being provided and shareholders are encouraged to ask questions via this facility. • • the timetable for submitting proxy votes (either electronically or using the hard copy proxy form) and the proxy deadline of 11.30 a.m. on 10 August 2020 - unlike in previous years, if you miss the deadline for submitting your proxy appointment you will not be able to come along to the AGM and attend in person and vote on the day. the advice to nominate the Chairman of the Meeting as your proxy and to provide voting instructions because nominating anyone else will mean that your votes will not count. • all resolutions will be voted on a poll, rather than on a show of hands, and all valid proxy votes cast will count towards the poll votes – the fact you are not permitted to attend the AGM will not impact your ability to vote and provided you appoint the Chairman of the Meeting as your proxy your vote will be counted. • • the AGM results will be announced, as usual, via a regulatory announcement and will be posted on the Company’s website as soon as practicable after the AGM. the processes for inspecting Directors service contracts and letters of appointment will not permit seeing them physically on the day of the AGM. • any references to ‘attend’ ‘speak’ or ‘vote’ in the notice and notes are there for legal reasons for the validity of the notice and should not be read as conveying any right to physically attend the meeting. • modifications to the standard notes to the Notice of Meeting are shown below in bold text. Please, therefore read the notes below carefully to learn about the altered processes and in case of any questions please contact Link Asset Services in connection with the voting processes, or Mountview for any other matters. Their contact details are noted below. Voting questions: For questions on the voting process either by hard copy or via the registrar’s website please contact Link Asset Services, by calling them on 0371 664 0300 or, if calling from overseas, on +44 (0) 371 664 0391. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. You can also contact the registrar by email at enquiries@linkgroup.co.uk. For all other matters please contact Mountview Estates P.L.C. on +44 (0)20 8920 5777 or by e-mail at reception@mountviewplc.co.uk. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 91 27569 7 July 2020 9:52 am Proof 22 91 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notice of Meeting (Continued) NOTES: 1. A Member who is entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend, speak and vote instead of him/her. A proxy need not also be a Member of the Company. If a Member appoints more than one proxy to attend the Meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the Member. If a Member wishes to appoint more than one proxy and so requires additional Forms of Proxy, the Member should contact Link Asset Services (PXS1), 34 Beckenham Road, Beckenham, Kent BR3 4ZF. Due to the current Government restrictions relating to Covid-19 and restrictions on attendance at the Meeting detailed on pages 89 and 91, all shareholders are encouraged to appoint the Chairman of the Meeting as their proxy this year to ensure their vote is recognised at the Meeting. Other named proxies will not be allowed to attend the Meeting. 2. A Form of Proxy is enclosed with this Notice and should be completed in accordance with the instructions contained therein. To be effective, the Form of Proxy and any power of attorney or other authority under which it is signed (or a notarially certified copy of such authority) must be deposited at the office of the Company’s Registrars, Link Asset Services (PXS1), 34 Beckenham Road, Beckenham, Kent BR3 4ZF, by 11.30 a.m. on 10 August 2020 or in the case of any adjournment of the Meeting, not later than 48 hours before the time of such adjourned Meeting. Amended instructions must also be received by the Company’s Registrars by the deadline for receipt of Forms of Proxy. 3. You may also submit your voting instructions electronically via our registrar’s website. Please go to www.signalshares.com and enter Mountview Estates P.L.C. If you have not already registered for Signal Shares you will need to enter your Investor Code which can be found on your share certificate or last dividend confirmation. Once registered you will be able to vote immediately by selecting ‘Proxy Voting’ from the menu. In order to be a valid proxy appointment, the member’s electronic message confirming the details of the appointment completed in accordance with those instructions must be transmitted so as to be received no later than 11.30 a.m. on 10 August 2020. The proxy appointment will not be accepted if found to contain a computer virus. 4. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer’s agent RA10 by 11.30 a.m. on 10 August 2020 or in the case of any adjournment of the Meeting, not later than 48 hours before the time of such adjourned Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended). In any case your proxy instruction must be received by the Company’s Registrars, Link Asset Services (PXS1), 34 Beckenham Road, Beckenham, Kent, BR3 4ZF by 11.30 a.m. on 10 August 2020 or not later than 48 hours before the time of any adjourned Meeting. 5. Any person receiving a copy of this Notice as a person nominated by a Member to enjoy information rights under Section 146 of the Companies Act 2006 (a “Nominated Person”) should note that the provisions in Notes 1 and 2 above concerning the appointment of a proxy or proxies to attend the Meeting in place of a Member, do not apply to a Nominated Person as only Members have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the Member by whom he or she was nominated to be appointed, or to have someone else appointed, as a proxy for the Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such an agreement to give instructions to the Member as to the exercise of voting rights at the Meeting. Nominated persons should also remember that their main point of contact in terms of their investment in the Company remains the Member who nominated the Nominated Person to enjoy information rights (or, perhaps the custodian or broker who administers the investment on their behalf). Nominated Persons should continue to contact that Member, custodian or broker (and not the Company) regarding any changes or queries relating to the Nominated Person’s personal details and interest in the Company (including any administrative matter). The only exception to this is where the Company expressly requests a response from a Nominated Person. 92 Mountview AR2020.indd 92 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 6. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended) and for the purposes of Section 360B of the Companies Act 2006, entitlement to attend and vote at the Meeting and the number of votes which may be cast thereat will be determined by reference to the Register of Members of the Company as at close of business on 10 August 2020 (the ”Specified Time”) or 48 hours (excluding any day or part of any day that is not a working day) before the date of any adjourned Meeting. If the Meeting is adjourned to a time not more than 48 hours after the Specified Time, that time will also apply for the purpose of determining the entitlement of Members to attend and vote and for the purpose of determining the number of votes they may cast at the adjourned Meeting. Changes to entries on the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting. This year please note given the current restrictions on attending the Meeting, Members will not be allowed entry to attend the Meeting. 7. Any corporation which is a Member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a Member, provided that, if it is appointing more than one corporate representative, it does not do so in relation to the same shares. This year please note given the current restrictions on attending the Meeting, corporate representatives of a Member will not be allowed entry to attend the Meeting. 8. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are cast and the voting rights in respect of those discretionary proxies, when added to the interests in the Company’s securities already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure Guidance and Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Conduct Authority. As a result, any Member holding 3% or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure Guidance and Transparency Rules, need not make a separate notification to the Company and the Financial Conduct Authority. 9. This Notice, together with information about the total numbers of shares in the Company in respect of which Members are entitled to exercise voting rights at the Meeting as at, 9 July 2020, being the last business day prior to the printing of this Notice and, if applicable, any Members’ statements, Members’ resolutions or Members’ matters of business received by the Company after the date of this Notice, will be available on the Company’s website www.mountviewplc. co.uk. 10. Under Section 527 of the Companies Act 2006, Members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (a) the audit of the Company’s accounts (including the Auditors’ report and the conduct of the audit) that are to be laid before the meeting; or (b) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the Companies Act 2006. The Company may not require the Members requesting any such website publication to pay its expenses in complying with Sections 527 or 528 Companies Act 2006. Where the Company is required to place a statement on a website under Section 527 Companies Act 2006, it must forward the statement to the Company’s Auditors not later than the time when it makes the statement available on the website. The business which may be dealt with at the Meeting includes any statement that the Company has been required under Section 527 Companies Act 2006 to publish on a website. S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 93 27569 7 July 2020 9:52 am Proof 22 93 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Notice of Meeting (Continued) 11. In normal circumstances any Member attending the Meeting has the right to ask questions. This year due to the current restrictions on attending the Meeting with Members not being able to attend in person, Members are being asked to submit any questions in relation to the business of the Meeting in advance by email to reception@mountviewplc.co.uk or by writing to the Company Secretary, Mountview House, 151 High Street, Southgate, London N14 6EW. Please submit questions as soon as possible and in any event no later than 31 July 2020. Responses to relevant questions submitted by 31 July 2020 will be provided, by way of a written Q&A, grouped into themes, posted on the Company’s website as soon as practicable in advance of the Meeting, and no later than 8 August 2020. Some, but not all, questions may receive individual responses. For questions received after 31 July 2020, the Directors will endeavour to provide answers as soon as practicable but responses may be provided after 8 August 2020. Responses will not be provided to questions which do not relate to the business of the Meeting or that the Directors determine require disclosure of confidential or commercially sensitive information or are already answered on the website or are already addressed elsewhere including in the annual report and accounts. The Company reserves the right to answer questions only from Members or those legally permitted to raise questions at the Meeting. 12. Any electronic address provided either in this Notice or in any related documents (including the Form of Proxy) may not be used to communicate with the Company for any purposes other than those expressly stated. 13. As at, 9 July 2020, being the last business day prior to the printing of this Notice, the Company’s issued capital consisted of 3,899,014 Ordinary Shares carrying one vote each. Therefore, the total voting rights in the Company as at, 9 July 2020, are 3,899,014. 14. Copies of the Directors’ service contracts and letters of appointment with the Company are available for inspection, under normal circumstances, at the registered office at Mountview House, 151 High Street, Southgate, London N14 6EW during normal business hours on weekdays (Saturdays, Sundays and English public holidays excepted) from the date of this Notice until the conclusion of the Meeting. Given the current exceptional circumstances should a shareholder wish to inspect any of these documents please submit a request to the Company Secretary at reception@mountviewplc.co.uk. 15. Explanatory note for resolutions 5, 6, 12 and 13 Changes to the Financial Conduct Authority’s Listing Rules (LR) in 2014 introduced new voting requirements for the election of independent Directors in listed companies with a controlling shareholder (a shareholder who exercises 30% or more of the votes). Under the rules, the election or re-election of any Director whom the Company has determined to be independent under the UK Corporate Governance Code must be approved by the shareholders as a whole, and separately by all shareholders excluding the Sinclair family concert party which is collectively deemed to be a controlling shareholder (the Independent Shareholders). Therefore at this year’s Meeting there will be two votes each in relation to the re-election of the Non-Executive Director, Ms. M.L. Archibald (formerly Jarvis) and the re-election of the Non- Executive Director, Mr. A.W. Powell, one vote by the shareholders as a whole and another vote by the Independent Shareholders. If a vote to re-elect a Non-Executive Director is not passed by the Independent Shareholders, the Company may propose a further resolution to re-elect the relevant Directors between 90 and 120 days from the date of the original vote. This further resolution in respect of each Non-Executive Director must be passed by a majority of the shareholders as a whole only, and there is no requirement for an additional vote by the Independent Shareholders. LR 9.2.2DG allows any Non-Executive Director who is not re-elected by the Independent Shareholders to remain in office until the further resolution has been voted on. 94 Mountview AR2020.indd 94 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:19 Mountview Estates P.L.C. Annual Report and Accounts 2020 Shareholder Information FINANCIAL CALENDAR 2020 Final dividend record date Annual Report posted to Shareholders Annual General Meeting Final dividend payment Interim results 10 July 10 July 12 August 17 August 26 November Copies of this statement are being sent to Shareholders. Copies may be obtained from the Company’s registered office: Mountview House 151 High Street Southgate London N14 6EW All administrative enquiries relating to shareholdings should be addressed to the Company’s Registrars: Link Asset Services (UK) Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU S T N E M E T A T S I L A C N A N F I Mountview AR2020.indd 95 27569 7 July 2020 9:52 am Proof 22 95 07/07/2020 09:53:25 M O U N T V I E W E S T A T E S P. L . C . A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 0 Mountview Estates P.L.C. Mountview House, 151 High Street, Southgate, London N14 6EW Tel:+44 (0) 20 8920 5777 Fax:+44 (0) 20 8882 9981 www.mountviewplc.co.uk Mountview Estates P.L.C. Annual Report and Accounts 2020 Mountview AR2020.indd 1 27569 7 July 2020 9:52 am Proof 22 07/07/2020 09:53:10
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